(Yicai) June 25 -- China’s central bank has added CNY300 billion (USD41.8 billion) of liquidity to the banking system through its medium-term lending facility to counter funding pressures from heavy bond issuance and support economic growth.

The People's Bank of China conducted the one-year MLF operation today to offset CNY182 billion (USD25.4 billion) of maturing loans. It means the bank has used the facility to introduce a net CNY118 billion (USD16.5 billion) of liquidity in June, marking the fourth monthly increase in a row.

The operation comes after net additions of CNY63 billion (USD8.8 billion) in March, CNY500 billion (USD69.7 billion) in April, and CNY375 billion (USD52.4 billion) last month via MLF operations. China also released CNY1 trillion (USD139.5 billion) in long-term liquidity in May through a cut in the reserve requirement ratio, or the share of deposits banks must hold in reserve as cash.

The continued expansion of MLF operations demonstrates strengthened monetary policy support, according to Wang Qing, chief macro analyst at Golden Credit Rating. It shows that the PBOC aims to meet the financing needs of businesses and households while enhancing counter-cyclical adjustments, Wang said.

Liquidity pressure has been building due to sustained large-scale government bond issuance and maturing interbank certificates of deposit, so the PBOC's net MLF injections help to maintain ample liquidity in the banking system, as well as curb funding fluctuations and steady market expectations, Wang added.

Earlier this month, the PBOC also conducted two outright reverse repurchase operations, totaling a net CNY200 billion (USD27.9 billion). Combined with today's action, the central bank's net medium-term liquidity injection for June reached CNY318 billion (USD44.3 billion).

Entering the second half of the year, funding pressure from fiscal spending and government debt sales will mount, with next month's liquidity gap expected to hit CNY1 trillion (USD139.5 billion).

Market mechanisms alone cannot effectively address this, making central bank support critical for liquidity maintenance, said Ming Ming, chief economist at Citic Securities. The PBOC's monetary policy stance is likely to remain loose in July, Ming said, adding that a potential resumption of bond trading to provide more liquidity cannot be ruled out.

Editors: Dou Shicong, Tom Litting