China Cuts Reserve Requirement

The stock market is up modestly today. The big news is that China cut its reserve requirement for its big banks. That’s how much money they have to keep in reserve and can’t lend out. The rate is now 17%. According to Bloomberg, the move will inject $105 billion to the Chinese economy.

The economy in China is weak and getting weaker. The authorities there have been trying everything to get it back on its feet, and the reserve requirement cut is their latest move. Of all the world’s stock markets, China’s is the single worst performer this year.

This is a change in China’s policy. Until now, the PBOC, China’s Fed, had used more modest policy tools to help the economy. Lowering the reserve requirement is seen as playing hardball. One concern is liquidity.

At noon, the U.S. market is up about 0.5%. It seems to be a fairly broad rally. Materials are leading while Healthcare is lagging.

Posted by on February 29th, 2016 at 12:03 pm

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