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China Injects $126 Billion Into Its Slowing Economy

China Injects $126 Billion Into Its Slowing Economy


China Injects $126 Billion Into Its Slowing Economy

BEIJING — Beijing has called on banks to open the lending spigots as China’s trade war with the United States rages and its economic slowdown shows little sign of abating.

The People’s Bank of China on Friday lowered the amount of cash that Chinese banks are required to hold in their coffers, freeing up $126 billion to flow into the financial system at an important time politically and economically.

The move indicates that China is willing to ease back some from its broad campaign to rein in excessive borrowing. Years of debt-fueled growth has led to bubbles in the financial system and created worries about hidden bombs deep within the country’s financial system.

By calling on banks to lend more to companies and debt-laden local governments, it is hoping to incite growth. Many businesses are finding it harder to keep their doors open, unemployment is creeping up and families are shouldering higher daily costs.

Still, the move was relatively modest by comparison with the size of the Chinese economy. Meanwhile, a yearlong trade war with the United States has worsened China’s economic predicament.

A growing number of economists have lowered their expectations for economic growth next year as the trade war shows no sign of ending.

“Policymaking in China’s case tends to be behind the curve, which means that in an ideal world the government should do more to support the economy. These policy measures are too mild and too little to stop the slowdown,” said Larry Hu, the chief China economist at Macquarie Group.

Mr. Hu said he plans to revise down his expectations for growth in 2020 from an original estimate of 6 percent to lower than 6 percent. Wang Tao, an economist at the Swiss bank UBS, said she expected growth to slow to 5.5 percent next year.

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