PBOC withdraws US$35bn from economy

China’s central bank removed a sizeable amount of cash from the financial system this week, its first withdrawl following a month of large-scale injections into the economy, The Wall Street Journal reported. After injecting US$26.2 billion last week, the People’s Bank of China withdrew US$35 billion this week through its open market operations, indicating that liquidity conditions have improved. Analysts say the falling benchmark interest rate has led to an ample supply of cash and that further injections might threaten to spark inflation. Earlier this week, Premier Wen Jiabao expressed his confidence that policy measures have stabilized the Chinese economy and that the full year growth target of 7.5% will be reached. The PBOC carries out open-market operations on Tuesdays and Thursday, offering repurchase agreements and bills in the money market with US$3.2 billion being offered on Tuesday.