China’s central bank injected a record Rmb570bn ($84bn) into the country’s banking system via open market operations on Wednesday in the latest effort to boost liquidity and promote increased lending to a slowing economy. Credit and money-supply data released on Tuesday showed that lending through both bank and non-bank channels remained sluggish in December, despite a series of monetary and fiscal easing measures in recent months.
These included cutting banks’ required reserve ratio earlier this month, a measure that will eventually inject a net Rmb800bn into the banking system. “Beijing is becoming increasingly worried as the growth slowdown rapidly worsens. The PBoC has ramped up its monetary easing,” Ting Lu, chief China economist at Nomura in Hong Kong, said in a note. “Chinese banks are also under pressure to ramp up lending to support Beijing’s call to support growth.”
In an additional sign of economic headwinds, growth of house prices slowed modestly in December, data showed on Wednesday. That followed Chinese trade data on Monday showing outright declines in both imports and exports. The People’s Bank of China injected Rmb350bn via seven-day reverse bond repurchase agreements on Wednesday morning and an additional Rmb220bn via 28-day reverse repos, the PBoC said in an online statement. The Rmb570bn injection was the largest ever using reverse repos on a single day, while only Rmb10bn in such instruments were scheduled to mature on Wednesday.
But analysts say that unlike the reserve requirement cut — which is permanent unless the PBoC actively reverses it — Wednesday’s temporary injection of temporary liquidity is largely an effort to help banks meet a seasonal surge in cash demand.