Chinese Central Bank is Increasing Lending Opportunities to Boost Economy

Chinese Central Bank is Increasing Lending Opportunities to Boost Economy

May 17, 2022 0 By Keith Jacobs

At present, the inflation rates are soaring around the world, and Central Banks are concerned with minimizing the ensued economic destruction. However, it seems that the priorities of the Central Bank of the People’s Republic of China are different altogether. Recently, the Chinese Central Bank shared enthusiasm for creating more lending opportunities to boost its economic development.

According to the latest article in New York Times, the monetary policies of the Chinese government are in stark contrast with its global counterparts. Recently, the Chinese Central Bank also claimed that the country is planning to decrease its Reserve Requirement Ratio. It means that the bank will have a minimum balance in Central Bank and bear a considerable interest cut down.

People’s Bank of China is Planning to Support Retail and Small Business Investors

The latest statement from the People’s Bank of China reiterates that the financial center plans to help the small investors and businesses out of the deficits that they have suffered from during the latest COVID pandemic. The Central Bank further explained that it is looking at stabilizing the CPI and supporting real economic development.

According to NYT financial experts, most banks in the world are currently trying to jump-start their economy with strategies like printing more money and inflating interest rates for the short term, which will discourage businesses and individuals from taking out loans and spending the money. In addition to the Federal Reserve, South Korea, Singapore, Bank of England, and New Zealand Central Banks have also taken the same route. Meanwhile, the European Central Bank has decided to stop buying more bonds that will create the same effect.

Unlike China, most economic units around the world are currently trying to pour as much money into the economy as possible. On the other hand, China is continuing its social restrictions that have rendered its logistics and truck fleet to freeze up. Furthermore, the Chinese Central Bank refrained from increasing the interest rates that will allow only companies with the best credit scores to lend money, giving rise to more state-owned organizations.

On the other hand, the People’s Bank of China is encouraging the regional banks to lend more money that will, in turn, support the SEMs. According to economists, the Chinese government has been able to keep inflation rates in control at only 1.5% despite the COVID hit. Furthermore, the reserve ratio has been reduced to 0.5%, which will allow smaller banking enterprises to lend more money. It is worth noting that SEMs are the biggest economic casualties of the COVID pandemic in China.