Connect with us

Hi, what are you looking for?


China offers $145B to banks as liquidity tightens

CHINA INJECTED CASH into the financial system by offering medium-term loans, in the government’s latest effort to ensure the country’s banks have sufficient liquidity.

The People’s Bank of China (PBoC) added 950 billion yuan ($145 billion) of one-year cash via the medium-term lending facility (MLF) on Tuesday, more than offsetting the 600 billion yuan that matures in December. That’s the fifth straight month of net injections using the tool. It kept interest rates on the loans unchanged at 2.95%.

The need to buoy the amount of liquidity in the financial system has becoming more pressing after a spate of corporate defaults squeezed lending in China’s interbank market. As the PBoC seeks to stabilize the amount of debt in the economy, its policy of tapering stimulus has pushed up money-market rates. Higher borrowing costs spilled over to government bonds, which are on track for an eighth month of losses. That would be their longest losing streak in 13 years.

Demand for cash typically increases toward the end of the year, as banks withhold it for regulatory checks. This month, lenders also need another 2.4 trillion yuan to repay short-term interbank debt and buy newly issued government bonds.

“Banks are still under rather big funding pressure,” said Ming Ming, head of fixed-income research at Citic Securities Co. The move was not in conflict with the authorities’ plan to exit pandemic-related emergency measures, he added.

China’s money market rates declined following the MLF injection, with the benchmark seven-day repurchase rate sliding 6 basis points to 2.04% as of 10:38 a.m. local time. Futures on 10-year government bonds climbed 0.23%.

The economy strengthened in November, supported by strong demand from home and abroad, data released on Tuesday showed. The country’s industrial output rose 7% last month from a year earlier, in line with the median estimate in a Bloomberg survey of economists. Its retail sales expanded 5% in the period.

In its monetary policy report released last month, the PBoC said the macro leverage ratio will likely stabilize, following comments from a deputy governor earlier in the month that exiting emergency support measures was only “a matter of time” and “necessary.” A gauge tracking China’s level of debt has surged to 277% of the country’s gross domestic output, the highest since Bloomberg started compiling the data in 2014.

Government bonds have continued to retreat this month, even after the PBoC unexpectedly added 200 million yuan via the MLF at the end of November. The yield on China’s 10-year notes is still near the highest since May 2019.

The PBoC typically conducts MLF operations on or around 15th day of every month. Some 300 billion yuan of one-year funds matured on Dec. 7, and another 300 billion yuan will come due Dec. 16. Separately, the central bank on Tuesday drained a net 50 billion yuan in short-term funding by letting most of its seven-day reverse repurchase agreements mature. — Bloomberg

Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Get the daily email that makes reading the news actually enjoyable. Stay informed and entertained, for free.
Your information is secure and your privacy is protected. By opting in you agree to receive emails from us. Remember that you can opt-out any time, we hate spam too!



GROSS BORROWINGS by the National Government had reached P2.75 trillion as of end-October as it continued to raise money for its pandemic response, preliminary...


By Luz Wendy T. Noble, Reporter THE PHILIPPINE Statistics Authority (PSA) said the base year for the consumer price index (CPI) will change to...


SOME INDIAN COMPANIES, including those from the pharmaceutical industry, are interested in investing in economic zones in the Philippines, according to an India Business...


By Keren Concepcion G. Valmonte, Reporter HOSPITALITY GROUPS expect a rebound in tourism as coronavirus disease 2019 (COVID-19) vaccination rates continue to improve and...


BUSINESSWORLD’s Luz Wendy T. Noble was recognized as the Best Reporter of the Year for Banking at the 30th annual awards of the Economic...


THE Securities and Exchange Commission (SEC) has flagged eight more entities in separate advisories for their unregistered investment solicitation programs. These offerings are PH...

You May Also Like


Having a good Instagram marketing agency to back up your Instagram account is an absolute must going into the new year. With competition stronger...


Ivermectin, an existing drug against parasites including head lice, has had a checkered history when it comes to treating COVID-19. The bulk of studies...


As a traditionally rigid insurance industry becomes bogged down by antiquated processes and operations, a handful of industry leaders are seeking to shake things...


Insomnia is the most common sleep disorder in the global population. Therefore, it is a problem that many people suffer or have suffered throughout...

Disclaimer:, its managers, its employees, and assigns (collectively "The Company") do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

Copyright © 2021 SmartRetirementReport. All Rights Reserved.