China’s central bank on Sunday freed its banks to lend more in the latest sign that officials are worried about the economy as it faces headwinds from a worsening trade war with the United States.
The People’s Bank of China cut the amount of money that some lenders are required to hold in reserve — called the reserve ratio — by one percentage point, which will effectively pump $110 billion into the economy. This is the fourth time this year that the central bank has cut the reserve ratio, though this cut was bigger and broader than previous ones.
The central bank said in a statement that it would cut the reserve ratio rate, effective Oct. 15, to ensure “reasonable and sufficient liquidity” in China’s economy. The move comes as officials have warned that trade frictions with the United States could shave as much as nearly one percentage point from China’s annual economic growth.
In September, the United States imposed tariffs on $200 billion worth of goods from China, dealing it a blow at a time when the country’s economy was already flagging.
But the signs of deepening economic troubles have been showing for months.
Consumers are spending less. Infrastructure investment — a pillar of the Chinese economy — has slowed significantly since the start of the year. Companies have defaulted on their bonds in larger numbers.
Officials have kicked into gear in recent months to bolster growth. They pledged to pump billions of dollars into infrastructure projects, shored up the value of the currency and moved to backstop a plunging stock market, which has hovered around bear-market territory.
Then, in September, new export orders — one indicator of China’s manufacturing — fell to the lowest level since 2016.
The move on Sunday by the People’s Bank of China was in direct response to the slowing growth, according to Zhang Ming, a researcher at the Chinese Academy of Social Sciences. Mr. Zhang predicted that China’s third-quarter gross domestic product would drop to 6.6 percent and that its fourth-quarter figure would be as low as 6.4 percent.
“Sino-U.S. trade frictions will further reduce the contribution of import and export to economy growth,” Mr. Zhang, who is also chief economist at Ping’an Securities, wrote on WeChat, the social media platform. “If export growth slows down due to trade frictions, it will influence manufacturing investment growth.”
Chen Shouhong, the founder of Gelonghui, an investment information platform, said that for the central bank to cut the reserve ratio, the economy “really is not doing well.” He wrote on WeChat, “There are fewer and fewer tools in the PBOC toolbox.”
Ailin Tang contributed research.