(Yicai) Feb. 4 -- China’s central bank has used outright reverse repurchase operations and government bonds trading to inject liquidity into the market and address the surge in cash demand before the Chinese New Year holiday.

The People’s Bank of China announced yesterday it will conduct a CNY800 billion (USD115.3 billion) three-month outright reverse repo operation today. Given that CNY700 billion three-month outright reverse repo operations will mature this month, this operation will result in a net injection of CNY100 billion.

This is the first time since last November that the PBOC has increased the scale of its three-month outright reverse repo operations.

The move aims to address potential liquidity tightening and ensure that the funding environment remains stable and ample ahead of the holiday season, said Wang Qing, chief macroeconomic analyst at Golden Credit Rating International.

Outright reverse repo operations are a liquidity injection tool introduced by the PBOC in 2024. Typically, the central bank conducts one three-month and one six-month operation each month to offset the maturing amounts for that month.

The PBOC is expected to conduct a six-month outright reverse repo operation around Feb. 15, likely rolling over or increasing the maturing amount of CNY500 billion for this month, said Dong Ximiao, chief economist at Merchants Union Consumer Finance.

Moreover, a medium-term lending facility operation is scheduled around Feb. 25, which is also anticipated to be rolled over or increased, Dong noted.

The PBOC yesterday also unveiled the various monetary policy tools it used in January. They included a net injection of CNY100 billion conducted through open market operations involving the buying and selling of government bonds. The injection volume is doubled that of the previous month.

Such a large-scale liquidity injection has reduced the likelihood of a cut to the reserve requirement ratio in the near term, especially ahead of the Chinese New Year, Dong pointed out.

The Chinese New Year holiday will run from Feb. 15 to 23 this year, extended by one day compared to previous years, making it the longest break on record.

Editors: Dou Shicong, Futura Costaglione