China Joins the Stimulus Party

China’s central bank joined its European counterpart in boosting liquidity to address weakening growth, underscoring a divergence in direction among the world’s biggest economies as the U.S. reduces stimulus.

The People’s Bank of China is injecting 500 billion yuan ($81 billion) into the nation’s largest banks, according to a government official familiar with the matter, signaling the deepest concern yet with an economic slowdown. Federal Reserve Chair Janet Yellen will announce another $10 billion cut to its monthly bond purchases after this week’s meeting, economists forecast, as she steers toward gradual interest-rate increases.

China’s credit expansion builds on targeted measures to shore up growth while stopping short of broad-based stimulus seen in the U.S. in the wake of the global financial crisis and still being pushed in Europe and Japan. By attaching a three-month term to its injection, China is taking a step down that path while maintaining control of a process designed to fuel demand for credit in an already debt-laden economy.

Bloomberg

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