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China bank cash boost

Brian Eric WillcockSeptember 17, 2014

Beijing seems to be worried about a possible liquidity shortfall and is handing out cash to its main banks. The move comes as foreign direct investment and production growth slow unexpectedly.

https://p.dw.com/p/1DDiK
Chinesische Zentralbank Hauptsitz Peking 2014
Image: Reuters/Petar Kujundzic

The Wall Street Journal reported on Wednesday that China's central bank is plying the country's top five lenders with a 63 billion euros ($80 billion) of cash. The money is being divided equally between the five, giving each 12.6 billion euros.

The fresh funds are aimed at boosting lending to banks, commercial companies and industry, similar to the long-term refinancing operation (LTRO) run by the European Central Bank.

However, the Chinese measure is thought to be preemptive, to head off a potential shortfall in liquidity further ahead. Besides a fall in domestic demand, foreign direct investment fell to a two and half year low in August. Industrial production growth also came in at 6.9 percent in August, the lowest in six years. Beijing has targeted 7.5 percent GDP growth for this year.

Chinese markets closed higher on the news. Shanghai gained half a percent to 2,307 points. Hong Kong's Hang Seng was a full 1 percent up to 24,376.

bew/uhe (Reuters, WSJ)