SHANGHAI (AFP) – A reported $81 billion injection into China’s major banks is probably the first of a series of fresh stimulus measures by Beijing to boost its flagging economy, the world’s second largest, analysts said.
Online portal Sina late Tuesday quoted financial institutions as saying the People’s Bank of China (PBoC), the central bank, would channel 500 billion yuan ($81 billion) into the country’s five biggest banks, all state-owned. The PBoC has not confirmed the move.
“We believe Beijing (is) to introduce a slew of other easing and stimulus measures in coming weeks to re-boost confidence and re-stabilise growth,” Bank of America Merrill Lynch China economist Lu Ting said.
Hong Kong’s Hang Seng Index jumped 1.07 per cent by midday on the reported move.
US stocks earlier reacted to the report – which was picked up by an international news agency – on Tuesday with the Dow Jones Industrial Average rising 0.59 per cent to 17,131.97 points and the broad-based S&P 500 up 0.75 per cent at 1,998.98.
The Industrial and Commercial Bank of China, Bank of China, China Construction Bank, Agricultural Bank of China and Bank of Communications will receive the funds in equal amounts over three months through the central bank’s so-called Standing Lending Facility, a tool it uses to manage short-term liquidity, Sina and analysts said.
The report follows a string of weak data for August, including a five-year low for industrial output growth and a surprise drop in imports, which have put in peril the government’s target of 7.5 per cent annual economic expansion for this year.
“Such a move highlights the fact that China’s policymakers are sensitive to the significant weakening seen in the August activity data and the move would be in line with our call that monetary policy will be eased further to boost the economy,” Nomura said in a research note.
China’s gross domestic product grew 7.5 per cent year-on-year in the second quarter this year, improving from 7.4 per cent in the first quarter, which was the worst since a similar 7.4 per cent result in July-Sept2012.
But some analysts played down the impact of the anticipated move, while China’s stock market was unimpressed, with the benchmark Shanghai Composite Index down 0.18 per cent by midday Wednesday.
“The impact of such a move on boosting corporate investment and supporting real economic growth will be relatively limited in our view, as the property downturn continues to worsen, excess capacity accumulates and business outlook remains weak,” said Wang Tao, head of China economic research at investment bank UBS.
Analysts said the scale of the injection was equivalent to around a 0.50 percentage point cut in the reserve requirements for banks, the amount of funds they are required to hold aside.