China Injects Liquidity of US$139 Billion to Mitigate Cash Crisis
The People’s Bank of China (PBOC), China’s central bank, has injected 1 trillion yuan or US$139 billion into the market through a reserve repo policy to prevent a cash crisis, Friday (07/06).
The PBOC took this step after the Chinese financial system began to show signs of pressure in recent days, with rising costs of short-term debt and long-term government bonds.
However, this funding was announced 3 months earlier than usual. Chief Economist of China Xiaojia Zhi stated that this was done to ease market concerns about interbank liquidity in China ahead of mid-year.
“The reverse repo announcement, along with its large size, demonstrates the PBOC's intention to alleviate market concerns regarding interbank liquidity conditions in China ahead of mid-year, especially with a record amount of NCD maturities in June,” said Xiaojia as quoted by Bloomberg.
In addition, this move is expected to ensure sufficient liquidity in the banking system, keep fluctuations in the money market under control, and support market expectations.