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China's Deputy Prime Minister Liu calls for more measures to support the economy by Reuters

© Reuters. US and Chinese officials hold trade negotiations at the US Trade Representative Office in Washington

By Zheng Li and David Stanway

SHANGHAI (Reuters) – Chinese regulators should strengthen support for the economy and maintain ample liquidity in the financial system, Deputy Prime Minister Liu Han said on Thursday to suggest that Beijing would soon reveal more policy strategies to boost growth thanks to the increased US trade press.

Beijing has plenty of political tools and can handle various challenges, Liu said in a financial forum in Shanghai.

Despite a large number of support measures and political relief since last year, China's refrigeration economy is still struggling to recover, and last month's sudden escalation in US-Sino tensions has sparked fear of a full blown trade war that could trigger a global recession.

Liu commented came after a day after the data showed that China's credit growth was weaker than expected in May, which strengthened the market's expectations that more money relief is needed. The factory operations were pulled in May and imports fell most within almost three years, suggesting a soft demand.

"At present, we have some external pressures, but external pressure helps us increase our self-confidence in innovation and accelerate the development of high-speed development," says Liu, who is also the main negotiator of the US-China Trade Negotiations.

The government will roll out stronger measures to promote reform and open up, Liu added.

The People's Bank of China Chief Yi Gang said last week that there was a "big gap" to make policy adjustments if the trade war were getting worse.

"We have plenty of room in interest rates, we have plenty of space in mandatory reserve conditions, and even for fiscal policy, I think the adjustment room is huge," says Yi.

Earlier on Thursday, China Daily said, referring to economists , China is expected to adjust money and credit delivery over the next few weeks, including cuts in interest or reserve ratio requirements, to counteract downside risks of trade tensions escalating.

Additional cuts in banks' reserve requirements ratios (RACs) were expected this year, especially After the trade conflict escalated last month, both sides raised the pace of each other's goods and Washington threatened more.

Last month, the PBOC increased efforts to increase loan and business activity and announced a three-phase reduction of regional banks' reserve requirements to reduce financing costs for small and private business.

It has now s had six RRR times since the beginning of 201


Unlike previous declines, however, the central bank has been unwilling to lower the reference rates so far. Analysts believe that more aggressive action is being held due to concerns that such a move could risk adding a mountain of debt repayment from previous stimulus sprees.

More powerful relief can also trigger capital outflows and increase the pressure on what has slipped nearly 3 percent against the dollar since trading-up last month.

Sources told Reuters in February that the PBOC considered a reference rate cut a last resort. But some analysts now believe that one or more cuts are likely if the trade dispute sprouts out of control and the US Federal Reserve is starting to lower its prices, giving the PBOC more room to maneuver.

Referring to experts, China Daily said that the financial institutions faced stricter liquidity in June, and the said authorities want to stimulate faster credit growth to meet the economic growth targets.

Beijing has set a growth target of about 6 to 6.5 percent this year, falling from 6.6 percent in 2018, which was the slowest rate of expansion the country has seen in nearly 30 years.

Analysts at Bank of America Merrill Lynch (NYSE 🙂 believe that China's GDP growth could fall to 5.8 percent this year and 5.6 percent by 2020 if the trade war intensifies.

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