China’s central bank has relaxed the rules on how much capital the country’s lenders must hold in cash reserves as it seeks to maintain growth.
It is the fifth such time during the last year that the People’s Bank of China (PBoC) has made such a move.
The measure comes amid growing concerns about weakening demand from Chinese consumers and businesses.
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The measure is expected to free up a further £46bn and the PBoC said it hoped the move would “better satisfy the credit demands of small and micro enterprises”.
News of the latest relaxation of the rules gave a boost to Chinese stock markets, which also received a fillip after it was announced that US trade representatives will visit China on Monday and Tuesday next week, with a view to resolving the current impasse over trade.
The Shanghai Composite Index rose by 2% and the CSI 300 Index of blue-chip stocks rose by 2.4%, with the Hang Seng in Hong Kong also finishing up by 2.25%.
However, economists are by no means agreed that the latest measures will do all that much to stimulate growth, particularly because the tweak in the rules on small businesses represents an attempt to increase lending to a specifically targeted sector of the economy.
On Wednesday, it changed the definition of what counts as a small business.
If a bank can prove to the PBoC it is lending more to small businesses, it will be allowed to place smaller reserves at the central bank, freeing up more money to lend.
So, by widening the definition of what counts as a small business, the PBoC effectively frees up more money to lend.