China’s PBOC Injects Seven-Year High of USD82.9 Billion Into Banking System
Zhang Yu
DATE:  Nov 15 2023
/ SOURCE:  Yicai
China’s PBOC Injects Seven-Year High of USD82.9 Billion Into Banking System China’s PBOC Injects Seven-Year High of USD82.9 Billion Into Banking System

(Yicai) Nov. 15 -- The People’s Bank of China added CNY600 billion (USD82.9 billion) of medium and long-term funds to the banking system today, resulting in a record-high single-month boost since December 2016.

The central bank conducted CNY1.45 trillion (USD200.2 billion) of one-year medium-term lending facility loans to cover CNY850 billion worth of MLF loans maturing today to maintain a reasonable abundance of liquidity in the banking system and to hedge the impact of short-term factors, including the peak of tax and government bond payments, the PBOC announced on its website. The operation has an interest rate of 2.5 percent, unchanged from earlier.

Moreover, the PBOC conducted seven-day reverse repos worth CNY495 billion at an interest rate of 1.8 percent today to offset a maturing balance of CNY474 billion, resulting in a net injection of CNY21 billion (USD2.9 billion).

The scale of MLF replenishment surged significantly this month because market funds tightened and banks have recently been showing more robust demand for liquidity, credit rating agency Golden Credit Rating said, adding that the policy loan increase will create favorable market conditions for the central government to issue CNY1 trillion of treasury bonds.

On Oct. 24, China approved the State Council to issue CNY1 trillion of special treasury bonds in the fourth quarter to support post-disaster reconstruction and to enhance disaster prevention and relief capacity in various areas. The central government will allocate the funds to regional governments through transfer payments, and local governments do not need to repay.

China is at a critical stage in driving economic recovery so MLF loans may continue to be renewed with a significant boost in December, and the country is likely to further cut the reserve requirement ratio by 0.25 percentage points by year-end, Golden Credit Rating predicted. Whether the PBOC will reduce interest rates depends on macroeconomic performance and the property market, it added.

China’s central bank cut the RRR by 0.25 percentage points in March and made a similar reduction in September. Thereby, the average RRR for financial institutions is about 7.4 percent.

Editors: Dou Shicong, Emmi Laine

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Keywords:   PBOC,MLF,liquidity,banking