BEIJING — China’s central bank is freeing up nearly $175 billion to get commercial banks to boost their lending and pay off short-term borrowings, the latest effort by Beijing to lift growth in a slowing economy as its trade fight with the U.S. escalates.
In a statement Sunday, the People’s Bank of China said it would reduce the amount of reserves most commercial banks are required to hold by 1 percentage point, effective Oct. 15. The move comes as the U.S. has imposed tariffs on $250 billion of Chinese goods and has vowed additional import taxes on $257 billion of products.
Chinese leaders are eager to get ahead of any potential economic impact of the trade spat and boost confidence in a flagging stock market, economists say. Stocks in Shanghai have sunk about 15% since the beginning of the year, while the yuan has weakened by more than 9% against the U.S. dollar since mid-April.
The central bank said the cut will free up 1.2 trillion yuan ($174.72 billion) in total. Of that, 450 billion yuan ($65.52 billion) will be for banks to repay short-term debt coming due this month and 750 billion yuan will be released into the financial market. Big Chinese banks will face a reserve-requirement ratio of 14.5%, down from 15.5% currently.
