China announces economic measures to stabilize its economy in response to the ongoing trade war with the United States. The People’s Bank of China (PBOC) and other key financial institutions have announced several initiatives. These include revisions to bank reserve requirements and interest rate reductions. All of them aim to promote economic growth despite high U.S. tariffs.
The announcement comes just as China and the United States prepare for crucial trade talks later this week in Geneva. U.S. Treasury Secretary Scott Bessent, U.S. Trade Representative Jamieson Greer, and Chinese Vice Premier He Lifeng will meet to discuss the future of the ongoing trade dispute. Both countries have maintained their strong positions on tariffs. These tariffs continue to negatively impact both economies, despite agreeing to hold negotiations.
China has already felt the impact of the U.S. tariffs, which have disrupted its export-driven economy. Furthermore, the protracted decline in China’s real estate market has further strained the country’s financial stability. In order to reduce pressure, the government has consequently put in place a number of policy initiatives.
Key measures announced include:
- Interest Rate Cuts: The People’s Bank of China reduced its reverse repo rate from 1.5% to 1.4% and lowered the lending rate to commercial banks by 0.25 percentage points to 1.5%.
- Reserve Requirement Reductions: A 0.5% reduction in the necessary reserve ratio for commercial banks allowed for the release of an extra $137.6 billion, or almost 1 trillion yuan.
- Funding for Innovation and Services: The government intends to provide more funding for industries such as elder care and other service sectors, as well as for innovations and factory modifications.
These actions are intended to increase trade and provide much-needed relief to businesses and consumers. Financial markets saw a brief upswing in response to these reports, with Hong Kong’s stocks rising more than 2% and Shanghai’s markets rising 0.5%.
As trade discussions continue, analysts remain cautious. Stephen Innes of SPI Asset Management said that while the talks would boost confidence, the trade dispute would likely take some time to settle.
The world economy is closely monitoring the U.S.-China trade dispute as a key factor influencing global trade and market dynamics in 2025.
Source: AP News
