News ID: 263829
Published: 0312 GMT January 03, 2020

Chinese central bank announces £87b cash increase

Chinese central bank announces £87b cash increase

On the first trading day of the decade, shares around the world surged after China’s central bank announced an 800 billion yuan (£87 billion) cash increase for the economy, and US President Donald Trump said phase one of a trade deal between Washington and Beijing would be signed on January 15.

The People’s Bank of China announced it would cut the amount of cash banks must hold in reserve and indicated it would continue to take action in 2020 to reduce borrowing costs for companies, in an intervention that analysts said could help prevent a growth slowdown in the world’s second-largest economy, the Guardian reported.

Joshua Mahony, a senior market analyst at the financial trading company IG, said: “With the Chinese pumping $115 billion into the banking system, it is likely that the wider economy benefits through an increase in lending for small- and medium-sized companies.”

Despite the optimism at the start of the year, business surveys have shown factory output in the UK and the eurozone slumped in December, reflecting Brexit concerns in Britain and the impact of the US-China trade war, which held back global trade and sapped business investment in 2019.

Economists said progress between the US and China could be unpicked in the future, warning past examples of compromise had been followed by the trade dispute reigniting.

Craig Erlam, a senior market analyst at the financial trading company Oanda, said: “Everything is not suddenly OK because the US and China are about to sign a phase one trade deal, or because the UK and EU are preparing to discuss the future relationship rather than the divorce. It could be another turbulent year with many surprises along the way.”

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