Question

Read The Article Below And Give A Brief Description In Your Own Words. Do You Agree Or Disagree With The Article? Explain (Maximum 150 Words)

BEIJING — China’s central bank moved on Friday to give the country’s slowing economy a jolt, saying it would essentially inject $126 billion into the financial system as Beijing fights an escalating trade war with the United States and contends with a dangerous addiction to debt at home.

The move signaled China’s willingness to ease up on a campaign to curb the borrowing that has weighed on growth in the country’s economy, the world’s second largest, and potentially to open its lending machine up even further if the trade dispute begins to take an even greater toll.

The People’s Bank of China said that it would cut its reserve requirement ratio — the amount of cash from deposits that lenders must keep in their coffers — by 0.5 percentage point on Sept. 16, which would add about 900 billion renminbi to the financial system.

Some banks will see their reserve ratio cut by one percentage point to promote lending to small businesses and private enterprises. Senior officials also indicated this week that they planned to loosen restrictions on local governments related to raising money for infrastructure projects.

Many businesses are finding it increasingly difficult to stay open, unemployment is creeping up, and families are shouldering higher daily costs. By calling on banks to lend more to companies and to encourage local governments already burdened by debt to borrow even more, the central bank hopes to stimulate growth.

Still, the step was relatively modest given the size of the Chinese economy, the economic harm done by a yearlong trade war with the United States and the lowered expectations among a growing number of economists of how much China’s economy will grow next year if the trade war drags on.

“Policymaking in China’s case tends to be behind the curve, which means that in an ideal world the government should do more to support the economy,” said Larry Hu, the chief China economist at the Macquarie Group. “These policy measures are too mild and too little to stop the slowdown.”

Mr. Hu said he planned to revise his own expectations for growth in 2020 down from his original estimate of 6 percent. Wang Tao, an economist at the Swiss bank UBS, said that she expected growth to slow to 5.5 percent next year.

The trade tensions between China and the United States escalated over the summer when Beijing allowed its tightly controlled currency to weaken to its lowest level in more than a decade against the American dollar.

Days later, central banks in several countries announced surprise interest rate cuts, setting off fears across global markets of a currency war that could stoke inflation and further weaken trade ties.

More than 30 central banks have cut interest rates this year amid rising concerns about economic growth and trade tensions. The Federal Reserve in the United States joined the parade last month, cutting its benchmark interest rate for the first time in a decade.

China’s central bank took its action on Friday after Premier Li Keqiang called for the use of tools to shore up the country’s economy. At a State Council meeting this week led by Mr. Li, officials acknowledged that the economy was facing more pressure in areas like job growth, finance and trade.

The central bank’s move is its latest to ease monetary policy. China has long used the banking system, which is controlled by the state, to flood the economy with cash when growth starts to slow. But experts have warned that this approach is becoming less effective as the country’s debts rise.

Some economists have also warned that such an approach fails to get money flowing to the most important and productive sectors of the economy, like privately managed businesses.

“You can release funds for banks to lend to private firms, but you’re saying to the banks, ‘Your cost of funds is unchanged, but your risk is much higher,’” said Shaun Roache, chief economist for Asia Pacific at S & P Global. The government, Mr. Roache added, is effectively telling banks to lend to riskier clients at lower interest rates.

“These companies aren’t implicitly guaranteed the way that state-owned companies are,” he said. “There is no incentive for the banks to do this.” For this reason, he said, big banks are unlikely to lend more than they are told to.

Answer 1

This article is about the trade war between China and United states and the steps taken by China to stimulate growth and jumpstart a weakening economy.

The trade war is causing in increase in the national debt of the country.

Chinese govt has previously been trying to curb debt through various measures.But the trade war has forced governments hand to ease up on its own stand.We are going to see a further increase in federal debt.

Further lenders will see a reserve requirement ratio cut which will further increase the lending.All in all,the economy is bleeding and measures are being taken to find a way through the trade war.

Another measure being taken is letting the currency value go down,increasing inflation which most probably will backfire because of the chain reaction it is going to set in motion around the globe.

Monetary policy is being eased,job growth and trade are being threatened.

Economist are on the other side criticising the govt for doing little to tackle the problem.Stability of the economy is in the stands now.GDP forecast looks dull.More measures should be taken if the govt intends to come out of the trade war with minimum damage.

I completely agree with the article.Trade war is effecting severe blows to the Chinese economy as well as the US.Yet so little is being done to fight it.Letting inflation rate rise is gonna have severe effects around the globe.Whether the time proven strategy of the Chinese govt of infusing cash to stimulate growth is gonna work or not?Only time can tell.

Ans is little bit more than 150 words.Kindly shorten the sentences per your taste.Thank you