As a result of an escalating trade war and a slower economy, China has decided to cut bank's reserve ratios and inject $126B into its economy as a result.

The People's Bank of China stated that it would officially trim down the country's reserve requirement ratio by half a percentage point next Monday, September 16, which would add $126B into the economy. In fact, some banks may see more of a cut in the reserve ratio. Also, officials have stated that they will encourage more infrastructure spending on the local level, in order to boost regional economies.

"The move shows policymakers are increasingly worried but it's far from enough to stabilize the economy," said Larry Hu, head of Greater China economics at Macquarie Group in Hong Kong. "The key constraint is that everything is slowing down - corporates are not willing to invest because of the trade war, a global slowdown, and weak infrastructure and property sector growth.

Over-investment in years past has brought the Chinese GDP close to the government's 6% baseline. This, coupled with Trump slapping more tariffs on the country and heightening trade tensions has forced the Chinese government to take swift and concrete action. What's more is that there is much political unrest and turmoil one of its most important and proximal supply chains: Hong Kong.

The State Council of China has also stated that it ill allocate more funds to construction projects including building new railways, and vocational training for workers in more remote parts.

However, it seems as though not all are optimistic about the potential impact of this move, especially given that China is known to have inflated its growth numbers in the past. Also, with the annual founder's day coming up soon, the government will want to make some sort of grand gesture in order to appease the public and quell concerns over the economy.

"Policymaking in China's case tends to be behind the curve, which means that in an ideal world the government should do more to support the economy," Hu further stated. "These policy measures are too mild and too little to stop the slowdown."