The PBOC board is set to consider the provision of additional liquidity to the bank system. This measure will be taken in order to prevent funds drain from the country and to encourage lending.
The PBOC will be able to allocate $100 billion to financial institutions while reducing reserve requirements by 0.5 percentage points.
Lending cuts resulted in yuan official rate decline by 2% on August 11 that caused an overall devaluation of 4%. In total, the central bank spent $40 billion on intervention to support the national currency.
There are growing concerns about economic slowdown in China.
“Views about China’s economic prospects appear to be shifting from serious concern to near panic,” said Eswar Prasad, a former China representative in the International Monetary Fund.
China’s main stock index sank to its January low and Shanghai index slumped by 8.5% on Monday.
