China’s central bank is making the biggest medium-term liquidity injection since 2020, stepping up efforts to support the nation’s economic recovery and debt sales, reports Bloomberg. The People’s Bank of China added a net RMB 289 billion ($39.6 billion) into the financial system via a one-year policy loan on Monday, the most since Dec. 2020. At the same time, it drained a net RMB 134 billion of short-term liquidity through open-market operations.
The nation is tussling with a stuttering economy, with consumer prices reflecting weak demand while data released last week showed the amount of loans made missed expectations. Beijing as well as local governments are ramping up debt sales to finance stimulus spending, reinforcing the need for more liquidity in the financial system.
“The additional liquidity injection aims to maintain stable interbank liquidity conditions amid rising LGB debt swap bond issuance, as well as stronger liquidity demand during tax payment times,” said Becky Liu, head of China macro strategy at Standard Chartered Bank, referring to local government bonds. “It also reflects stronger liquidity demand by commercial banks.”