China’s central bank and stock market

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China’s economy and its challenges

Asian stock markets increased on Tuesday. Such as China’s Shanghai Composite Index (SHCOMP) rose by 0.2%. On Monday, Shanghai’s Composite Index increased by 2.1%. Another Asian index, which is Hong Kong’s Seng Index (HSI), rose by 0.2% on August 20. It is worth mentioning on Monday Seng Index increased by 2.2%, which is the best result in two months.

The shares of Chinese tech companies are also on the rise. For instance, ACC Technologies shares increased by 4.8%. Another tech company which gained from this situation is Sunny Optical Technology as its stocks rose by 5.9%.  Both of these companies are listed on the Stock Exchange of Hong Kong. This stock exchange is the largest in Asia in terms of market capitalization.

China’s central bank and stock marketStock market update

People’s Bank of China is the central bank, and as any other central banks play a crucial role in the local economy. It means that any decision made by the People’s bank influence the Chinese economy. However, unlike the U.S. Federal Reserve, it is using different monetary policies.

For instance, it does have a single monetary policy, and instead of this, People’s bank is using various methods to control the market. On Tuesday, the People’s Bank of China made several changes to boost the local economy.

One of the main changes is that it lowered its Loan Prime Rate (LPR) to 4.25%. As mentioned above, there are several other changes as well. For instance, the bank increased the number of financial institutions which ask for the LPR quotations. This number increased from 10 to 18 financial institutions.

Another news is that from now on Loan Prime Rate are subject to change on the 20th of every month. People’s Bank used to change this rate in July.

The purpose of these new monetary policies is to facilitate the growth of the Chinese economy. The list of changes is quite long. The Chinese economy is slowing down, and these measures should change the situation for the better.

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