China pumps $188 billion into its economy
2 Min Read
As post-COVID threats to recovery put China's real estate sector at risk, the Chinese government decided to pump $188 billion into its economy.
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A housing complex by Chinese property developer Evergrande
China's Central Bank (The People's Bank of China) said it would cut the reserve requirement ratio for most banks by half a percentage point, which would reduce the sums of money banks have to keep in reserve. This would unleash close to $188 billion for business and household loans.
China had signaled that it will take more aggressive actions to protect the economy in 2022, with the Communist Party's leadership stating that "ensuring stability" would be a top priority in the coming year.
Beijing has been cautious about intervening in the economic recovery during the pandemic. Instead of flooding the economy with stimulus, it has offered more targeted support, which included, for example, small businesses.
The real estate crisis seems to be one of China's biggest challenges, with Evergrande, one of its largest real estate developers, close to defaulting on $300 billion in loans. The announcement on Friday that it may not have enough money to pay off its debts caused Hong Kong's shares to plummet 20%.
Evergrande's collapse may introduce a ripple effect that would affect China's property sector, which accounts for close to 30% of GDP.
