Reserve requirement move from the People's Bank of China

The People’s Bank of China lowers the reserve requirement ratio by 200 basis points The world’s second-largest economy has announced a series of measures to combat the pressures created by the troubled housing sector, declining global demand, and rising unemployment. The People’s Bank of China (PBOC) announced for the first time this year that it will reduce the amount of foreign exchange deposits that banks are required to hold as reserves (the reserve requirement ratio). Accordingly, the reserve ratio that financial institutions must hold as of September 15 has been lowered from 6 percent to 4 percent. In addition, down payments for home purchases have been reduced, while banks were asked to reduce current mortgage interest rates. Accordingly, the minimum down payment nationwide will be set at 20 percent for first-time home buyers and 30 percent for second-time home buyers. The reductions in mortgage interest rates will be negotiated between banks and customers. Both practices will come into effect on September 25. Finally, China has decided to increase personal income tax deductions for child care, parental care, and children’s education expenses in an effort to boost the country’s rapidly changing household consumption. Australia & New Zealand Banking Group Ltd. “The policy package is more comprehensive than market expectations. Confidence will increase in the near term. However, more clues are still needed to say that this is a turning point,” said Zhaopeng Xing, senior China strategist.