China orders more lending to entrepreneurs amid trade spat

China pumps USD 109 billion into economy as trade war bites on growth

Image Courtesy Reuters

The Shanghai Composite is down 17.5 per cent this year.

Hong Kong's Hang Seng slumped 4.4 per cent last week as investors anxious about the escalating trade row between the United States and China.

On the back of the central bank's announcement, China's mainland markets traded in negative territory for much of their first trading day following the Golden Week holiday.

The planned cut to banks' reserve requirement ratios (RRRs) would be the fourth reduction this year as China loosens credit conditions to support businesses and calm market jitters amid an intensifying trade war with the United States.

"An RRR cut is not enough to counter the impact of the trade war", Shanghai Wisdom Investment General Manager David Dai told Reuters. Chinese dealers were playing catch-up with sharp losses last week, when Bloomberg reported that Beijing inserted microchips into equipment made in China for Amazon and Apple, and possibly for other companies and government agencies.

Telecoms equipment maker ZTE led tech shares downward on Monday, falling 8.14% to 16.81 yuan after a Bloomberg News report last week said China had inserted special microchips into computer goods exported to the USA to steal technology secrets.

China's commerce ministry has approved six cities for a special trade program in which exporters are exempted from a value-added tax of 16 percent, according to recent local media reports.

Ping An Insurance shed 5.43% to 64.70 yuan and China Pacific Insurance dropped 4.00% to 34.09 yuan.

The central bank said the move would inject a net 750 billion yuan ($109.2 billion, €94.9 billion) in cash into the banking system. "Liquidity is not the issue".

It comes as the USA and China have imposed tariffs on one another's goods in a row that is hitting companies and risks hurting the global economy.

Average interest rates faced by companies have edged down since April, as a more generous liquidity policy from the PBOC has lowered market rates, even as benchmark lending rates remained unchanged, Oxford Economics said in a report on Thursday. Yields of China's 10-year central government bonds have been trending lower this year, standing at 3.633 per cent on Monday. At present, the interest rate on China's benchmark bond is about 60 basis points higher than on the US one. "The narrowing interest rate differentials between China and the U.S. will exert more downward pressure on the RMB", wrote Nathan Chow, strategist at DBS Group Research. The last close before the long holiday was 6.8725 to the dollar. Prior to Wednesday's market opening, the PBOC set the yuan's midpoint rate at 6.8571 per dollar, the weakest level since August 24, and 131 pips or 0.19 percent weaker than the previous fix of 6.8440. China's yuan was weaker at 6.8979 per USA dollar at 0333 GMT, compared with a previous onshore close of 6.8725 per dollar.

But the bigger conundrum for USD/CNH and the yuan is that of the 7.00 handle.

China's yuan eased against the U.S. dollar in thin trade on Wednesday, reflecting a weaker official midpoint, as the market waited to see what the U.S. Federal Reserve does at a policy meeting and how its Chinese counterpart reacts.

Huge Google Pixel Slate press pics leak, revealing key features and specs
PSN ID Change Feature Announced, In PlayStation Preview Program Now