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Saturday, November 23, 2019

What has China done to stimulate its economy and its impacts?

China has been cutting its RRR in 2019 to boost its money supply.

http://sg-stock.blogspot.com/2019/05/how-china-rrr-cut-will-impact-its.html

China has implemented a new LPR to be used as a new benchmark for commercial loans (SMEs).  This is meant to boost bank lending, a.k.a, money supply to business owners.

http://sg-stock.blogspot.com/2019/08/why-is-renminbi-rmb-depreciating-again.html

China has just implemented a property measure to keep its property prices at bay to prevent any disruption to its economy.

http://sg-stock.blogspot.com/2019/10/when-will-china-reduce-its-interest.

China has cut its MLF for the first time since 2016 to boost money supply to financial institutions.  This, in turn, will lower the LPR because it is pegged to MLF.  Again, this will boost the money supply to business owners.

http://sg-stock.blogspot.com/2019/11/china-has-cut-its-loan-rate-finally.html

China has cut its 7-day repo rate for the first time since 2015.  The repo facility is a short-term sale and repurchase agreement (borrowing), issued by the government (central bank) with mainly government securities.  Therefore any repo rate cut will discourage buying by financial investors and keep cash in the economy.  In other words, this is to maintain the money supply and prevent a monetary tightening situation in the economy without injecting new cash into the economy.

https://www.reuters.com/article/us-china-openmarket-omo/china-cuts-key-liquidity-rate-for-first-time-since-2015-idUSKBN1XS04E

China has cut the 5-year LPR for the first time and this will affect the property sector since the 5-year LPR is used as a benchmark for the property loans.

https://www.reuters.com/article/us-china-economy-lpr/china-cuts-new-benchmark-lending-rate-to-lower-costs-shore-up-economy-idUSKBN1XU05H

From these monetary actions, we can see that China is maintaining the existing money supply and injecting new money supply into its economy to stimulate some growth.  Furthermore, China is willing to encourage some growth in its property sector by tweaking its LPR.

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