(Yicai) Jan. 15 -- The People’s Bank of China will inject CNY300 billion (USD43 billion) of net liquidity into the market through a six-month outright reverse repurchase operation today.

The PBOC will conduct a CNY900 billion outright reverse repo operation with a fixed quantity through interest-rate bidding today to keep ample liquidity in the banking system, the central bank announced yesterday. The operation will have a term of six months.

According to statistics from Wind Information, CNY600 billion of six-month outright reverse repo operations will mature this month, resulting in a net injection of CNY300 billion in January.

On Jan. 8, the PBOC conducted three-month outright reverse repo operations worth as much as those maturing this month. With the CNY300 billion liquidity injected today, it marks the eighth consecutive month that the central bank has injected medium-term liquidity into the market via outright reverse repo operations.

Banks grant large amounts of credit lending, and enterprises pay heavy taxes in January, Dong Ximiao, chief researcher at China Merchants Bank-China Unicom Consumption Finance, told Yicai. These two factors, coupled with the cash withdrawal rush before the Chinese New Year holiday and other factors, raised the demand for liquidity in the market, he added.

The net injection of liquidity via outright reverse repo operations this month has continued to pump money into the market, which will help maintain abundant liquidity and ensure the stable operation of the financial market at the beginning of the year, Dong noted.

This month, CNY200 billion medium-term lending facilities will mature. The PBOC will likely conduct an MLF operation of CNY200 billion around Jan. 25, which is expected to be the same as or higher than the matured amount, to continue to inject medium-term liquidity into the market and further improve the term structure of market liquidity, Dong predicted.

As CNY200 billion MLF will mature this month, the PBOC will likely continue its policy operations to maintain ample liquidity supply through tools, such as net MLF injections and bond purchases, considering the rise in the future pressure on government bond issuance and cash pressure with the arrival of the Chinese New Year holiday, said Ming Ming, chief economist at Citic Securities.

Looking ahead, industry insiders generally believe that the PBOC will continue to inject medium-term liquidity into the market using policy tools, such as outright reverse repo operations and MLFs, which is in line with the country’s direction to adopt a moderately loose monetary policy and ensure ample liquidity this year.

Editor: Futura Costaglione