According to Reuters, China’s central bank unveiled on Tuesday its strongest intervention since the epidemic, aimed at boosting the economy and bringing it closer to the government’s growth target.
According to the article, China’s central bank will reduce banks’ reserve requirement ratios (RRRs) by 50 basis points, enabling approximately 1 trillion yuan ($142.21 billion) for new lending.
If necessary, the RRR may be reduced by 0.25-0.5 percentage points later this year. Furthermore, China’s central bank will lower the seven-day reverse repo rate by 0.2 percentage points to 1.5%.
Another Reuters article stated that following the steps announced by China’s central bank, the country’s authorities committed on Thursday to deploy the necessary fiscal spending to fulfill this year’s economic growth target of around 5%. The announcements impacted market sentiment.
The Shanghai Composite Index rose nearly 4% on Thursday. A comeback in the Chinese market might catalyze a shift of foreign money away from India and toward China, drawn by its attractive low valuations.
Mint consulted experts to gain insight into how China’s new stimulus would affect its market and what the ripple effects might mean for the Indian stock market.
This is what they said: V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services. The Chinese monetary stimulus measures boosted the Chinese and Hong Kong markets yesterday, and if the rise continues, FIIs may allocate more capital to these relatively favorable valuations.