ZCZC
BCN-26
CHINA-BANK-LIQUIDITY
China central bank drains liquidity from market
BEIJING, July 24, 2019 (BSS/Xinhua) – China’s central bank drained 164.3
billion yuan (about 24 billion U.S. dollars) from the financial system on
Tuesday, with more reverse repos and medium-term lending facility (MLF)
maturing than conducted.
The People’s Bank of China (PBOC) injected a total of 497.7 billion yuan
into the market via MLF and targeted medium-term lending facility (TMLF), as
502 billion yuan of MLF matured, the central bank said on its website.
The 200-billion-yuan MLF will mature in one year at an interest rate of 3.3
percent, while the TMLF totaling 297.7 billion yuan will mature in one year
at an interest rate of 3.15 percent.
PBOC skipped reverse repo operations on Tuesday citing reasonably
sufficient liquidity in the banking system. On the same day, 160 billion yuan
of previous reverse repos matured.
The MLF tool was introduced in 2014 to help commercial and policy banks
maintain liquidity by allowing them to borrow from the central bank using
securities as collateral. TMLF was introduced in December 2018 to encourage
lending to small and private businesses.
A reverse repo is a process in which the central bank purchases securities
from commercial banks through bidding, with an agreement to sell them back in
the future.
China will keep its prudent monetary policy “neither too tight nor too
loose” while maintaining market liquidity at a reasonable level in 2019.
BSS/XINHUA/HR/1440