China has launched large-scale easing measures in an attempt to staunch the economic bleeding caused by the trade war.

The People's Bank of China announced a rate cut, a reserve requirement ratio reduction, and the introduction of a loan tool worth 100 billion, demonstrating a strong determination to stimulate the economy.

Amid the escalating US-China trade war and increasing pressure on economic growth, the Chinese government has finally stepped in to stabilize the market. The People's Bank of China and financial regulatory authorities held a press conference on Wednesday, announcing a series of easing measures, including interest rate cuts, lowering the reserve requirement ratio for banks, and introducing liquidity and financing support tools worth over 1.5 trillion yuan, in an effort to revive weak domestic demand and market confidence.

The simultaneous lowering of interest rates and reserve requirements releases market liquidity exceeding 1 trillion.

The Governor of the People's Bank of China, Pan Gongsheng, announced that the seven-day reverse repurchase rate will be lowered by 10 basis points, from 1.5% to 1.4%. This adjustment is expected to simultaneously drive down the Loan Prime Rate (LPR), further reducing the financing costs for enterprises and individuals.

At the same time, the central bank also decided to lower the reserve requirement ratio (RRR) for financial institutions by 50 basis points, which is expected to release about 1 trillion yuan (approximately 138.6 billion USD) in liquidity, further supporting bank lending and market funding supply.

Focusing on key industries, supporting sci-tech innovation and real estate financing

In addition to monetary easing tools, the authorities also announced a series of industrial support measures, including enhanced financing support for key sectors such as technology and real estate. China will establish a relending tool with a scale of 500 billion yuan, specifically aimed at promoting consumption and the development of the elderly care industry, demonstrating that the government is accelerating the deployment of a new round of economic transformation and domestic demand stimulation.

The housing market and auto loans receive additional relief, and the housing provident fund loan interest rate is reduced.

Against the backdrop of ongoing pressure in the real estate market, the central bank also announced a reduction in the housing provident fund loan interest rate by 25 basis points. The interest rate for the first home five-year loan will be lowered from 2.85% to 2.6%, easing the repayment burden for first-time homebuyers. In addition, the reserve requirement for automobile finance companies will gradually be reduced from the current 5% to 0%, providing additional liquidity support for automobile consumption.

New measures for small and medium-sized enterprises and the private sector are about to be introduced.

Li Yunze, the head of the Financial Regulatory Administration, pointed out that additional support measures for small and medium-sized enterprises and private enterprises will be announced soon. This indicates that the Beijing authorities are accelerating the shift from "spot stimulation" to "systematic support" to ensure that the real economy, especially the main employment sectors, is not overwhelmed by macro pressure.

US-China Resume High-Level Talks; Trade War May Welcome a Turning Point

It is worth noting that just hours before this press conference, the Chinese government confirmed that Vice Premier He Lifeng will meet with U.S. Treasury Secretary Janet Yellen later this week in Switzerland to discuss tariffs and trade matters. This will be the first formal talks between the two sides since U.S. President Trump announced a significant increase in tariffs on Chinese goods to 145%.

As a countermeasure, China will recently impose retaliatory tariffs of up to 125% on American imported goods, further escalating the Sino-U.S. trade war. There is widespread concern about whether this high-level dialogue can thaw the tense relations between the two countries and bring economic and market hope.

Analyst: Policy tools still have room; further interest rate cuts may continue.

The chief economist of ING Greater China stated that policymakers may have grasped some preliminary economic data indicating that the trade impact has begun to affect the economy. He expects that China may further cut interest rates by 20 basis points this year and again lower the reserve requirement ratio by 50 basis points. However, the next steps may not be initiated until after the Federal Reserve starts to cut rates.

This article discusses how China has introduced large-scale easing measures in an attempt to mitigate the economic damage caused by the trade war. It first appeared in Chain News ABMedia.