The central government has beefed up measures to stabilize the economy, including cutting the amount of cash banks must hold in reserve, with experts saying the moves show the resolve of policymakers to ensure stable growth.
The State Council said in a statement after an executive meeting on Sept 4 that more steps will be adopted to ensure the stability of employment, the financial sector, foreign trade, foreign investment, domestic investment and market expectations.
It called for better use of countercyclical policy tools and quicker implementation of measures to reduce real borrowing costs, saying that monetary policy will continue to be prudent and subject to anticipatory adjustments and fine-tuning as necessary.
The People's Bank of China, the central bank, announced on Sept 6 that the reserve requirement ratio for all banks will be cut by half a percentage point from Sept 16.
The reserve ratios for some city commercial banks will then be cut by another 1 percentage point in two steps, on Oct 15 and Nov 15.
The cuts will release 900 billion yuan ($126.32 billion) of liquidity, the central bank said, adding that the cuts would not flood the economy with stimulus and its prudent policy stance had not changed.
Premier Li Keqiang, who presided over the executive meeting, said the government's priorities are to strengthen weak areas, improve public livelihood and give growth sustained momentum.
He urged efforts to further expand effective investment and better coordinate the government's proactive fiscal policy and prudent monetary policy.
The Cabinet statement said the external environment has become more complicated and challenging, and the economy is faced with mounting downward pressure.
China's GDP growth slowed to 6.2 percent year-on-year in the second quarter, its slowest pace in the 27 years since quarterly record keeping began.
Shen Jianguang, chief economist at digital technology company JD Digits, said the measures adopted by the Cabinet showed the resolve of policymakers to stabilize economic growth with stronger countercyclical policies.
He said trade frictions between China and the United States remained the largest source of uncertainty for the Chinese economy, and major economic indicators in July, such as industrial output and retail sales, were below satisfactory levels.
"It is more than necessary to inject liquidity through the cutting of reserve ratios to support the real economy," he said.
Premier Li underlined the need to stabilize the job market, the government's top priority.
He called for quicker implementation of policies already rolled out, including steps to expand enrollments in vocational colleges by 1 million and using 100 billion yuan from the surplus in unemployment insurance funds to boost technical training for workers.
The meeting also highlighted the need to stabilize commodity prices, with measures to ensure stable pork supply and prices.
To stabilize investment, the Cabinet called for the issuance of local government special bonds to be completed before the end of this month so that the funds can be channeled to projects before the end of October.
Hua Changchun, an analyst with Guotai Junan Securities, said the bond issuance and liquidity injection policies exceeded market expectations and showcased the central government's resolve to stabilize growth.
"First, the policies are intended to bolster support to the manufacturing sector, and a key goal is reduce its financing costs," he said.
"So there is a possibility that the interest rates of medium-to long-term loans to manufacturing businesses will be further cut."
The second goal, Hua said, is to boost support to investment in infrastructure.
Growth in infrastructure investment has been sluggish since the beginning of this year, and the special bonds and newly injected liquidity will help fuel investment in the area.
He said the Cabinet's decision at the meeting to allocate part of the special bonds designated for next year to investment in areas such as railways, rail transit and parking lots will also help boost infrastructure investment, thus helping stabilize growth.
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