All countries have peak holiday seasons where people in general move from one place to another. In the US, it is Thanksgiving weekend followed by Christmas holidays. In China it is the Lunar New Year, where millions of people will travel back to their parents and grandparents’ hometowns.
When people travel in great numbers there is extra demand on the banking system, and in an article from Reuters, China’s central bank was cutting the banks must hold as reserves. The number is $800 billion yuan or $ 149,2 billion in dollars.
The Chinese economy is expected to grow, but only 6% which is low for their economy. The releasing of reserves would allow banks to increase their loan portfolios to stimulate more lending. The Central Bank of China stressed the money should be used for small. local businesses. (Unlike the US tax cut which helped large businesses the most).
Linking to dividend paying stocks, the easing of reserve requirement is one method to stimulate growth and central banks use it all the time. The bankers are trying to achieve some level of balance between the politicians remarks and the ability for individuals and businesses to repay their loans. The fewer defaults the better it is for everyone.
There are more questions than answers, till the next time – to raising questions.