China announced a series of policies designed to invigorate its economy and stimulate consumer spending. These measures include interest rate cuts by the People’s Bank of China (PBoC), reductions in reserve requirements for lenders, recapitalization of major commercial banks, and targeted support for the struggling real estate market.
On Tuesday, China announced a raft of policies aimed at boosting the economy and encouraging consumption. The People’s Bank of China cut its seven-day reverse repo rate from 1.7% to 1.5%.
The Chinese stock market received some love as well. Regulators will provide the equivalent of $71 billion to help brokers, insurance companies, and funds buy stocks. The PBoC will also provide $114 billion to help companies buy back shares. Stock investors applauded, sending the Here's a deeper look at government policies that may hurt future business investment and consumer spending in China more than the PBoC’s latest initiatives will help:), the parent company of Calvin Klein and Tommy Hilfiger, on its national security blacklist for not purchasing cotton from its western Xinjiang region. The company has 30 days to defend itself against the accusation that it has been discriminating against Xinjiang-related products over the past three years.
This high-risk environment combined with the sluggish economy have sharply cut venture capital fundraising and new startups being founded. In 2017, Rmb124.9 billion of VC funds were raised; last year only Rmb16.6 billion was, according to a September 12Likewise, the number of new companies started peaked in 2018 at 51,302; it was down to 1,202 last year. The numbers are on track to fall further this year.
The policy change will extend the life of the pension fund, which was estimated to run out of funds in 2035 if no action was taken. However, it could also exacerbate the high unemployment rate among young workers.
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