China's Sept FX reserves fall more than expected to $3 trln

China's Sept FX reserves fall more than expected to $3 trln

China's Sept FX reserves fall more than expected to $3 trln

Chilling global markets on Monday, Chinese shares .CSI300.SSEC slumped and the yuan CNY=CFXS fell despite Beijing saying it would slash the amount of cash that commercial lenders need to set aside, releasing a net 750 billion yuan ($108 billion) into the banking system.

China's national bank said it would cut save prerequisite proportions by 100 premise focuses from 15 October.

"This is a sign of policy easing to counter (the effects of) the US-China trade war and shows (Beijing's) determination to maintain growth", said Liao Qun, chief economist of China Citic Bank International.

The yuan fell for the sixth straight month in September as the dollar remained buoyant, suggesting Beijing may be in no rush to intervene because a weaker currency would support its exporters amid the escalating Sino-U.S. trade war.

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Weakening exports were already a drag on growth in the first half of the year after giving an added boost to the economy last year, highlighting the need for sustained strength in domestic demand if significant new USA tariffs are imposed.

Friday's USA non-farm payrolls showed job creation slowed in September, likely from Hurricane Florence's impact on restaurant and retail payrolls, but the Labor Department report also showed a rise in wages that could keep the Federal Reserve on track for more interest rate hikes. The move hopes to reduce financing costs and spur growth amid growing concerns over a potential economic slowdown resulting from the trade war between the US and China.

Foreigners dumped 9.7 billion yuan (S$1.94 billion) of A shares through exchange links with Hong Kong on Monday, just short of a record hit eight months ago, as mainland markets reopened after a week-long break.

Commenting on the central bank's move to tweak the RRR ratio, University of Jinan finance professor Zhao Jian argued that "liquidity is not the issue right now".

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Losses on major indexes in mainland China were as high as 4.8% in a major market rout, with the China A50, which includes major companies from both the Shenzhen and Shanghai indexes, as the biggest loser.

The stock market declined Monday taking its cue on Asian trading, as another strong United States jobs reading further fanned expectations the Federal Reserve will hike interest rates at a quicker pace.

But an intensifying tit-for-tat increase in tariffs by the United States and China has sparked fears that China's export-oriented economy may grow at a substantially slower rate than had been expected, prodding the authorities to order economic stimulus measures. But some key activity indicators have weakened more sharply. The July nationwide jobless rate rose to 5.1 per cent. The government is aiming to help small and mid-size businesses in particular, which have had trouble obtaining loans and face other rising pressures.

"Liquidity is flush in the banking system. There is room for further reductions and I expect another one percentage point cut by the year-end".

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