China rushes about 1 trillion yuan into banks in just two weeks – News Couple

China rushes about 1 trillion yuan into banks in just two weeks

(Bloomberg) — China is pushing nearly 1 trillion yuan ($156 billion) in money into the banking system in just two weeks, bolstering a signal that it will use short-term liquidity to maintain growth rather than ease monetary policy.

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In a pattern also seen in September, the People’s Bank of China was pumping huge sums of cash through open market operations to deal with month-end needs — this time, it comes to corporate tax payments and domestic debt issuance.

The rush of short-term liquidity comes as China’s policymakers strive to maintain economic growth without fueling rising inflation. While the People’s Bank of China (PBOC) lowered the reserve requirement ratio in July to fuel speculation with more easing, it showed few signs that more cuts are on the way, suggesting that more of these cash injections will be used for the rest of the year.

“It is to ensure sufficient short-term liquidity in the financial system with lots of coupons and principal payments from issuers of high-yield real estate,” said Tommy Ong, managing director of Treasury and Markets at DBS Hong Kong Limited. The People’s Bank of China (PBOC) does not want to be seen as hindering the yuan’s strength by adopting more aggressive policies such as lowering the required reserve ratio across the board, or even lowering the interest rate.”

A net injection of about 940 billion yuan in the past two weeks is the largest since January 2020, according to data compiled by Bloomberg. Regional authorities are set to sell 544 billion yuan of bonds by this week, the second-largest weekly issuance in history, aggregated data shows.

Banks’ overnight borrowing costs rose 21 basis points to 2.14%.

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