China regulators free up extra $100B for bank lending

People spend their time outside a bank in Beijing, Monday, June 25, 2018. China says it will cut the amount of money some banks are required to keep on hand in part to free up funding for small businesses, amid a brewing trade war with the United States. (AP Photo/Andy Wong)

BEIJING — Chinese regulators have freed up an extra $100 billion for bank lending in a move financial analysts said could help to reassure investors amid trade tensions with Washington.

The reduction on Sunday in reserves banks are required to hold was part of a series of such cuts economists had forecast before the dispute with President Donald Trump erupted. But they said the announcement could help to defuse fears a threatened U.S. tariff hike might dampen Chinese economic growth.

The central bank said the cut, the third this year following reductions in January and April, was intended to help state companies restructure debts.

"Against the tensions, China's latest reserve ratio reduction, while expected, serves as a counterbalance to the soft sentiment," said Jingyi Pan of IG in a report.

The amount of money banks must keep on reserve with the central bank will be reduced by 0.5 percentage points of their deposits, according to the People's Bank of China. It said that would release about 700 billion yuan.

The central bank said 200 billion yuan ($30 billion) of that is earmarked for lending to small businesses, with the rest going to debt restructuring.

Washington is due to impose an additional 25 percent tariff on $34 billion of Chinese goods on July 6 in response to complaints Beijing steals or pressures foreign companies to hand over technology.

Beijing has vowed to retaliate. Trump has threatened additional tariffs, raising to $450 billion the total of Chinese products that could be covered by the measures, or nearly 90 percent of China's exports to the United States.

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