(Bloomberg) — China is pushing almost a trillion yuan ($156 billion) of funds into the banking system in just two weeks, reinforcing a signal that it will use short-term liquidity to sustain growth rather than ease monetary policy.
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In a pattern seen also in September, the People’s Bank of China has been injecting huge amounts of cash through open-market operations to cope with month-end needs — this time, it’s for corporate tax payments and local debt issuances.
The rush of short-term liquidity comes as policymakers in China seek to sustain economic growth without stoking rising inflation. While the PBOC cut reserve requirement ratio in July to fuel speculation of further easing, it has shown little signs that more cuts are on the way, suggesting that more such cash injections will be used for the rest of the year.
“It’s to ensure ample short-term liquidity in the financial system with plenty of coupons and principal payments from high-yield property issuers” due, said Tommy Ong managing director for treasury and markets at DBS Hong Kong Ltd. “On the other hand, the PBOC doesn’t want to be seen as blocking yuan strength by adopting more aggressive policies such as an across-the-board RRR cut, or even a rate cut.”
The net injection of some 940 billion yuan in the past two weeks is the most since January 2020, according to data compiled by Bloomberg. Regional authorities are scheduled to sell 544 billion yuan of bonds by this week, the second-largest weekly issuance in history, data compiled also shows.
Overnight borrowing costs for banks rose 21 basis points to 2.14%.
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