China cuts bank reserves to boost growth as investors sour on outlook

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Good morning. China’s central bank will next month cut the amount of reserves banks must maintain, its governor Pan Gongsheng announced yesterday. The move is part of efforts to boost growth as investors sour on the outlook for the world’s second-largest economy.

The 0.5 percentage point cut to the People’s Bank of China’s reserve requirement ratio will inject Rmb1tn ($140bn) of liquidity into the financial system.

Pan pledged the central bank would “create a good monetary and financial environment for the economy”, in comments that follow a brutal sell-off in Chinese stocks this month.

On the renminbi, which fell about 5 per cent against the dollar over the past year as high US interest rates increased selling pressure on China’s currency, Pan predicted the central bank would have more “space” for policymaking.

Here’s what else the PBoC governor said about the Chinese economy — and how economists reacted to the reserve cut.

Here’s what else I’m keeping tabs on today:

• Economic data: South Korea and the US publish fourth-quarter growth figures.

• Eurozone: The European Central Bank is expected to leave monetary policy on hold.

• Results: Blackstone, Fujitsu General, Intel and LG Electronics are among the companies reporting earnings.

Five more top stories

1. Moscow has accused Kyiv of shooting down a military transport plane carrying Ukrainian prisoners of war, which crashed near Russia’s border with Ukraine yesterday. Russia’s defence ministry said all 74 people on board the Il-76 plane died, including 65 Ukrainian soldiers who were being transported for a prisoner exchange from Moscow to the Belgorod region of Russia. Here are more details on the crash.

• More on Ukraine: Slovakia’s Russia-friendly prime minister has made a U-turn on Ukraine, pledging support on his first trip to the war-torn country.

• Nato: Prime Minister Viktor Orbán said Hungary was committed to ratifying Sweden’s bid to join Nato after Turkey opted to approve its accession to the western military alliance.

2. The US has repeatedly asked China to urge Tehran to rein in Iran-backed Houthi rebels attacking commercial ships in the Red Sea but has seen little sign of help from Beijing, according to American officials. National security adviser Jake Sullivan and his deputy discussed the issue this month with the Chinese Communist party’s international department head, US officials said. Here’s why China is reluctant to wade in.

3. Large multinational companies are urging Joe Biden’s administration to keep politics out of any national security review of Nippon Steel’s purchase of US Steel. The Japanese company’s $14.9bn proposed acquisition of the Pittsburgh-headquartered steelmaker has provoked outrage from prominent lawmakers, and President Biden himself has thrown his weight behind a possible national security investigation of the deal.

• US elections: Donald Trump overcame the biggest early obstacle on his path to a White House comeback on Tuesday night — and delivered what could be the knockout blow to his last competitor on the Republican side.

4. Israel’s military is working to establish a buffer zone inside Gaza, demolishing buildings near the border despite warnings from the US against any long-term reduction of the enclave’s territory. To enforce the buffer zone, Israeli forces have been destroying buildings along the border with Gaza.

5. Joe Lewis, the British billionaire whose family owns Tottenham Hotspur football club, has pleaded guilty to three criminal counts in an insider trading case. The charges to which Lewis pleaded guilty in Manhattan federal court yesterday carry an overall maximum potential sentence of 45 years in prison, although he is likely to get far less time when he is sentenced on March 28.

The Big Read

Starbucks has long touted itself as one of the most worker-friendly environments in corporate America. But its image has been tainted by a crackdown on unionisation efforts started two years ago by employees campaigning for better pay. Now, the coffeehouse chain is the target of an unprecedented attempt by trade unions to bring the fight directly to the company’s boardroom, in a battle set to become one of the most closely watched on Wall Street.

We’re also reading . . . 

• After Jokowi: Investors hope the Indonesian president’s successor will maintain the path that transformed south-east Asia’s biggest economy into a commodities powerhouse.

• Risks and fragilities: Humanity needs to outgrow its habitual myopia and tribalism to confront the challenges of our messy and unpredictable world, writes Martin Wolf.

• Crash test scandal: A safety testing scandal at Japanese carmaker Daihatsu is shaping up as a pressure point for change at its parent Toyota, writes David Keohane.

Chart of the day

Apple is quietly increasing its capabilities in artificial intelligence, making a series of acquisitions, staff hires and hardware updates that are designed to bring AI to its next generation of iPhones.

Take a break from the news

If you want to be a serious player in the bar world these days, you need a snack menu by a big-name chef, writes FT drinks expert Alice Lascelles. These cocktail bars will make you reconsider your dinner plans.

Additional contributions from Tee Zhuo and Gordon Smith