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China injects $81 billion into economy to stimulate growth:Equity markets expected to rise to the benefit of Excel China Fund

The People’s Bank of China is injecting $81 billion dollars into the economy to stimulate economic growth. The money will be funneled through the country’s five biggest banks, providing them with more money to lend over a 3-month period, with the aim of stimulating business activity and spurring domestic demand in the slowing economy. This move is expected to produce more targeted results compared to the implementation of broad-based monetary and fiscal measures.

Prior to this stimulus measure, the central bank made two targeted reductions in reserve ratios for banks - the first in April which applied to selected small rural banks and the second in June which covered most city commercial banks and non-county-level rural commercial banks and cooperatives. Regulators also increased banks’ capacity to lend money by changing the way loan-to-deposit ratios are calculated.

Evidently, the Chinese government is taking the right steps to maintain growth in the world’s fastest growing economy. As a result, bank stocks rallied in Hong Kong and the Chinese currency stabilized. The Chinese equity markets are expected to respond positively to the benefit of investors in the Excel China Fund. The fund is co-managed on the ground by China AMC and Baring Asset Management, two of the most respected asset managers in China.

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