China in­jects nearly US$100 bil. into banks for econ­omy

The China Post - - WORLD BUSINESS -

Main­land China has in­jected nearly US$100 bil­lion from its for­eign ex­change re­serves into two pol­icy banks, which lend based on gov­ern­ment di­rec­tives, to help spur the coun­try’s slug­gish econ­omy, state media re­ported.

Main­land China’s cen­tral bank on Tues­day com­pleted putting US$48 bil­lion into the China De­vel­op­ment Bank and US$45 bil­lion into the Ex­port-Im­port Bank of China, the of­fi­cial Xin­hua news agency re­ported.

The move was to en­hance their cap­i­tal base and sup­port the econ­omy, it said.

“The in­jec­tion sug­gests the cen­tral bank is try­ing to guide funds to go to the real econ­omy, like ex­ports and in­fra­struc­ture con­struc­tion,” China economist at Bar­clays Cap­i­tal, Wang Shengzu, told AFP.

Main­land China’s econ­omy, the world’s sec­ond-largest, ex­panded 7.4 per­cent last year, its weak­est since 1990, and has slowed fur­ther this year, grow­ing 7.0 per­cent in each of the first two quar­ters.

The gov­ern­ment has set a tar­get of around 7.0 per­cent growth for all of 2015.

In a bid to stim­u­late ac­tiv­ity, China has cut in­ter­est rates four times since Novem­ber and has also low­ered the re­serve re­quire­ment ra­tio — the amount of money banks must put aside.

“The funds re­leased from ear­lier mon­e­tary loos­en­ing didn’t go to the real econ­omy. In­stead, most of it went to the fi­nan­cial in­sti­tu­tions and the stock mar­ket,” Wang added.

The bench­mark Shang­hai stock in­dex rose 150 per­cent in 12 months to mid-June in a bor­row­ing-fu­elled surge, be­fore plum­met­ing al­most a third in three weeks.

The Wu­tong­shu In­vest­ment Plat­form Co., which in­vests China’s for­eign ex­change re­serves, car­ried out the bank fund in­jec­tions and will be­come a share­holder in both fi­nan­cial in­sti­tu­tions, Xin­hua said.

Main­land China’s for­eign ex­change hold­ings are the world’s largest, though they fell to US$3.69 tril­lion at the end of June, down from US$3.73 tril­lion at the end of March.

Bloomberg News re­ported China De­vel­op­ment Bank and another pol­icy bank, the Agri­cul­tural De­vel­op­ment Bank of China, plan to is­sue 1.0 tril­lion yuan (US$164 bil­lion) worth of bonds to fund con­struc­tion projects to boost the econ­omy.

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