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Market Extra: China props up domestic growth in light of trade worries, economic slowdown

The People’s Bank of China injected some $74 billion worth of medium-term lending facility loans into its banking system overnight, in a move considered to be the start of a new phase for China.

The injection of the one-year loans was a new reflation strategy with the goal to boost domestic demand, said Morgan Stanley currency strategists Hans W. Redeker and Gek Teng Khoo. “The market’s behavior seems to be indicating that China has entered a new phase, reacting to indicators of slowing domestic growth and trade worries,” they wrote in a note Tuesday.

China’s State Council also pledged to engage in more proactive fiscal policy, which would likely be enough to give its economy a boost, even if the measures weren’t as severe as those seen in 2009, market participants said.

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