China orders more lending to entrepreneurs amid trade spat

12 October, 2018, 07:58 | Author: Brooke Harris
  • Chinese markets

The US is fighting a trade war with China which threatens the outlook for Chinese manufacturing and exports.

The PBOC will continue to adopt a prudent, neutral monetary policy and this reserve ratio cut won't lead to yuan depreciation pressures, the central bank said in the statement.

The Shanghai Composite index finished 3.7 per cent lower, its worst day since June 19.

Shanghai shares touched their lowest since late 2014, while China blue chips slid 3 percent.

Chinese stocks plunged Monday, with the China A50 index losing more than 4.8% in trading.

Despite China's flagging economy, President Trump has rejected recent Chinese calls for negotiations over the trade dispute, claiming the offers are inadequate and that it is not the right time to make a deal. Still, tariffs could hurt the economy the longer they last. "We find it quite hard to reconcile the political machinations that are going on over there being friendly to markets".

The announcement of the relaxing the RRR requirement for the banks, which are also saddled with the huge local government debt of United States dollars 2.58 trillion comes amid deepening trade war with US and raising of the interest rates by US Federal Reserve, intensifying the pressure on capital outflows.

On Monday, Hong Kong's Hang Seng index was down 0.5 percent and a sub-index tracking information technology firms was 0.9 percent lower.

India vs West Indies
Thanks to his brilliant performances in Tests, Ravindra Jadeja is all set to make a comeback in the ODI squad. Left-arm pacer Khaleel Ahmed continues to stay with the team after an impressive debut in the Asia Cup.

The 30-year Treasury bond reached a four-year high of 3.424 percent, and was at 3.4054 percent at the US close on Friday. That was the biggest drop in nearly a month and led to the redback's lowest dollar value since May a year ago.

The offshore yuan was also weaker at 6.9050 per dollar. China is reluctant to ease policy via a policy rate cut to avoid fuelling any increase in leverage and therefore continues to embark on targeted easing in the form of RRR cuts.

With the increase in United States tariffs likely to start "being a drag" on Chinese exports, Fenner said Beijing wants to "shore up and provide some support for domestic demand". "There is room for further reductions and I expect another 1 percentage point cut by the year-end".

Asian markets fell on Monday, extending last week's sell-off as another strong U.S. jobs reading further fanned expectations the Federal Reserve will hike interest rates at a quicker pace.

The announcement comes after Beijing pledged to speed up plans to invest billions of dollars in infrastructure projects as the economy shows signs of cooling furhter.

Investors are also keeping an eye on Brazil after right-wing Congressman Jair Bolsonaro won almost half the votes in Brazil's first-round presidential election on Sunday, marking a major shift to the right in Latin America's largest nation fueled by voters' anger at corruption.

Following the PBOC's move, the offshore yuan was 0.2 percent weaker against the dollar in early trade on Monday.

The FTSE China A50 Index of large caps, which includes stocks that overseas investors are more likely to own, sank nearly 5 per cent in its biggest selloff since January 2016.

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