Chinese authorities on Wednesday unveiled a series of economic stimulus measures, including interest rate cuts and a major liquidity boost, as Beijing moves to cushion the impact of its ongoing trade war with the United States.
The announcement came ahead of high-level trade talks scheduled for this weekend in Switzerland, where US Treasury Secretary Scott Bessent and chief trade negotiator Jamieson Greer are set to meet with China’s top economic official, He Lifeng. The meeting marks the first significant opportunity for both sides to de-escalate trade tensions after a prolonged standoff over tariffs that has disrupted global markets and supply chains.
China’s economy has already begun to feel the strain from the heavy US tariffs, with factory activity contracting in April at its fastest rate in 16 months. Analysts warn that the levies could deepen deflationary pressures and put further stress on the job market, as exporters lose access to one of their biggest international markets
“The domestic economy must be strong enough before China kicks off any protracted trade negotiations,” said Xing Zhaopeng, senior China strategist at ANZ, referring to the newly announced stimulus policies.
Chinese stock markets rose in response to the measures and the prospect of thawing trade relations, with investors welcoming the economic support and renewed diplomatic engagement.
Analysts at Citi noted that “the tariff impact had started to surface” and described the stimulus as “tactical,” suggesting it could provide China with added leverage in the upcoming trade discussions. “Timely domestic support could create more leverage for China,” they wrote.
Among the key measures, China’s central bank will reduce the interest rate on its seven-day reverse repurchase agreements by 10 basis points to 1.40% starting May 8, with other rates set to follow suit. Additionally, the reserve requirement ratio (RRR) for banks will be lowered by 50 basis points from May 15, bringing the average to 6.2%.
Pan Gongsheng, Governor of the People’s Bank of China (PBOC), said this RRR cut—the first since September—would inject 1 trillion yuan ($138 billion) into the financial system.
At the same press conference, Wu Qing, Chairman of the China Securities Regulatory Commission, pledged support for A-share listed firms affected by tariffs. Meanwhile, Li Yunze, head of the National Financial Regulatory Administration, announced an expansion of a pilot programme allowing insurance companies to invest a further 60 billion yuan ($8.31 billion) into the stock market.
Pan also revealed plans for new low-cost relending facilities to support purchases of tech-related bonds and investments in elderly care and service consumption. Existing support tools for agriculture and small businesses will also be enhanced, he added.
Faridah Abdulkadiri
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