Foreign media described these actions as "broader-than-expected," signaling the government's commitment to sustaining economic stability. Economists believe these measures will bolster market confidence for the remainder of the year. Importantly, these policies increase the likelihood that China will achieve its 2024 growth target of around 5 percent, despite external challenges and economic pressures.
Following the announcement, Chinese stock markets saw significant gains on Tuesday. The Shanghai Composite Index jumped 4.15 percent, marking its largest single-day increase in more than four years, while the Shenzhen Component Index rose 4.36 percent.
The policies were detailed in a press conference held by leaders from the country's central bank, financial regulator, and securities regulator. They addressed critical sectors, including liquidity, real estate, and the stock market.
Pan Gongsheng, governor of the People's Bank of China (PBC), revealed plans to cut the RRR by 0.5 percentage points, injecting approximately 1 trillion yuan ($142 billion) of long-term liquidity into the financial system. He also suggested that further cuts of 0.25-0.5 percentage points could follow, depending on market conditions.
Additionally, the PBC will lower the interest rate on seven-day reverse repos from 1.7 percent to 1.5 percent. The medium-term lending facility rate is expected to drop by 0.3 percentage points, while long-term lending and deposit rates may decrease by 0.2-0.25 percentage points.
In terms of housing, the PBC will reduce mortgage rates on existing home loans by an average of 0.5 percentage points and lower the minimum down payment requirement on second homes to 15 percent.
For the stock market, the PBC plans to introduce new monetary policy tools to ensure stable market growth. Meanwhile, Wu Qing, chairman of the China Securities Regulatory Commission, announced that new guidelines would soon be issued to encourage the entry of medium- and long-term funds into the stock market.
Pan reiterated the PBC's commitment to maintaining an accommodative monetary policy, improving the precision of monetary regulation, and creating an environment that supports stable economic growth and high-quality development.
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