China’s central bank is injecting 500 billion yuan ($81 billion) into the country’s five major state-owned banks as it moves to counter slower-than-expected growth in the world’s No. 2 economy, according to a senior Chinese banking executive.
The move contributed to a rise in Asian markets early Wednesday, but falls short of a more sweeping effort, such as an interest-rate cut, to lift the economy, showing that Beijing is continuing to use targeted measures. (Latest: China Home Prices Weaken)
Some Chinese bankers and executives doubt the measure will do much to help rev up economic activity, pointing to sagging demand for loans from businesses due to the gloomy economic outlook.
Economists also warned that the move may not be enough, and that Beijing may face growing pressure to adopt more broad-based stimulus measures if momentum weakens further.
The injection from the People’s Bank of China will be in the form of a three-month, low-interest-rate loan to the banks, said the executive, who was briefed on the decision. The PBOC will pump 100 billion yuan each into Industrial & Commercial Bank of China Ltd. , China Construction Bank Corp. , Agricultural Bank of China Ltd. 601288.SH +0.40% , Bank of China Ltd. and Bank of Communications Co. 601328.SH +1.86% , the executive said.
While there are no explicit conditions attached to this targeted lending, the PBOC is expected to guide the big banks to channel credit into areas the government has deemed as important to the economy, such as public housing and private and small businesses, the executive said.
The move has a similar impact as a 0.5-percentage-point cut in the amount of reserves China’s commercial banks set aside with the People’s Bank of China. But a reserve-rate cut would be seen as a broader-based, longer-lasting move, and Chinese officials would have less say in where the money ended up.