(Yicai Global) Nov. 15 -- China's central bank is not likely to cut the reserve requirement ratio in the short term because it is using one of its liquidity boost tools slower than earlier, indicating that the market is not out of cash, according to a chief economist.

The possibility that the PBOC will reduce the RRR in the short term is not large, Wang Qing, chief macro analyst at Golden Credit Rating International, said to Yicai Global. The People’s Bank of China replaced only part of the loans it offered to lenders via the medium-term lending facility this month.

The sum of maturing MLF loans in November hit a record high for a single month, so market participants predicted that the PBOC will alleviate the tightening of liquidity by lowering the RRR, a portion of liquid assets that banks need to keep to ensure their financial health. 

The PBOC today added CNY850 billion (USD120.7 billion) of one-year MLF while loans worth CNY1 trillion (USD142.2 billion) matured, the central bank announced on its website. The interest rate was 2.75 percent, unchanged from last month.

The central bank has injected medium- and long-term liquidity of CNY320 billion into the financial system so far this month through the two programs of pledged supplementary lending, as well as technology and innovation relending. The sum exceeds the expiring MLF, the PBOC said.

The PBOC also implemented a seven-day reverse repurchase operation worth CNY172 billion today against a sum of CNY2 billion (USD284.4 million) that matured, consequently unleashing short-term funds of CNY170 billion.

Market liquidity is reasonable and sufficient despite the trimmed MLF, Ming Ming, chief economist at Citic Securities, told Yicai Global. The latest moves reflect the central bank’s aim to support growth in the real economy by bolstering credit injections, Ming added.

The regulator is thinking about the currency and the real economy. China's central bank will be prudent about adopting a RRR cut because it wants to stabilize the yuan's exchange rate, Wang said, adding that the US Federal Reserve is likely to continue raising interest rates so the US Dollar Index should remain strong.

The MLF interest rate remained unchanged for the third consecutive month this month after it was lowered by 10 basis points in August amid a series of policies to prop up economic growth. The main target in the next stage is to carry out these measures to increase domestic demand, Wang added.

China’s economic environment is becoming complex as slashing rates is no longer enough to reach the expected effects, Zhou Maohua, macro analyst at China Everbright Bank, said to Yicai Global. Domestic demand is sluggish and some sectors are facing difficulties, which calls for synergy and collaboration among multiple authorities to implement structural policy tools, Zhou added.

Editors: Dou Shicong, Emmi Laine, Xiao Yi