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17 December 2019

China injects $2 billion into banking system as loans mature

The need to buoy the economy may have become less pressing for China after authorities agreed to the first phase of a broader trade deal with the US.

Bloomberg/Paul Yeung

China injected liquidity into the financial system by offering medium-term loans to banks in the government’s latest effort to support economic growth, reported Bloomberg.

The People’s Bank of China (PBOC) added CNY 300 billion ($43 billion) through the medium-term lending facility, with CNY 286 billion used to roll over loans due this week. The central bank offered one-year loans at 3.25 per cent. PBOC refrained from injecting cash through reverse repurchase operations for a 19th session, the longest hiatus in a year.

The deal will involve reduced US tariffs in exchange for more Chinese purchases of American farm goods such as soybeans and pork as well as commitments on intellectual property, forced technology transfer and currency markets.

Demand for cash typically increases toward the end of the year, as banks withhold it for regulatory cheques. Liquidity conditions are set to become more volatile next month, as individuals and corporates withdraw funds to prepare for the week-long Lunar New Year break.

Economic growth showed signs of stabilising in November 2019. Industrial output rose 6.2 per cent from a year earlier, versus a median estimate of five per cent.


RELATED STORIES: People’s Bank of China





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