China has taken new stimulus measures to fend off an economy suffering the worst year in several decades as it is “eating the tariffs” imposed by President Donald Trump administration.
The People’s Bank of China (PBC) said on Friday, Sept. 6, that it would lower the required reserve ratio for financial institutions by 0.5 percentage points from Sept. 16 in order to lower financing costs and further support the real economy.
Accordingly, the reserve ratio, which defines the amount of cash banks must hold as reserves, will be cut to the lowest level since 2007, according to Bloomberg.
In addition, China’s central bank will also cut the reserve ratios by one percentage point for rural commercial banks operating within provincial administrative regions in order to support micro and small businesses and private enterprises. The reduction will take effect in two steps on Oct. 15 and Nov. 15, with a cut of 0.5 percentage points each time.
These required reserve ratio cuts would help inject some 900 billion yuan ($126 billion) of liquidity into the economy, following two previous cuts which released 800 billion yuan in January and 280 billion yuan in May.
The world’s second largest economy is facing a domestic slowdown as well as a trade fight from the United States.
In a tweet on Friday night, President Trump said, “China just enacted a major stimulus plan. With all the Tariffs THEY are paying to the USA, Billions and Billions of Dollars, they need it!”
In a previous tweet on Friday morning, President Trump wrote, “China is eating the Tariffs. Billions pouring into USA. Targeted Patriot Farmers getting massive Dollars from the incoming Tariffs!… China having worst year in decades. Talks happening, good for all!”
“China is eating the Tariffs.” Billions pouring into USA. Targeted Patriot Farmers getting massive Dollars from the incoming Tariffs! Good Jobs Numbers, No Inflation(Fed). China having worst year in decades. Talks happening, good for all!
— Donald J. Trump (@realDonaldTrump) September 6, 2019
Speaking to reporters Wednesday in the Hurricane Dorian briefing, President Trump also said China is feeling it in the trade war.
“China has now had the worst year that they’ve had in 57 years. This is the worst year they’ve had in 57 years. And they want to make a deal,” he said.
In 1962, or 57 years ago, China was an impoverished wasteland recovering from the massive famine caused by Mao Zedong’s radical economic policies, according The Associated Press.