Why is the People's Bank of China injecting money into banks?

The People's Bank of China is injecting money into banks to ensure they have enough cash to meet the surge in demand during the Lunar New Year holidays and to address an estimated liquidity gap.

How much money has the PBOC injected?

The PBOC injected 600 billion yuan ($86.4 billion) via 14-day repurchase agreements and is expected to add as much as 3.5 trillion yuan before the holidays.

What are the future expectations for China's monetary policy?

Economists expect China to cut banks' reserve-requirement ratio by 50 basis points this year and reduce interest rates, with inflation data guiding the extent of policy support.

Home / Business and Economy / PBOC Boosts Cash Supply for Lunar New Year

PBOC Boosts Cash Supply for Lunar New Year

9 Feb

•

Summary

PBOC injected 600 billion yuan via repurchase agreements.
Liquidity gap of 3.2 trillion yuan identified by calculations.
Analysts predict further PBOC actions like rate cuts.

PBOC Boosts Cash Supply for Lunar New Year

The People's Bank of China (PBOC) has significantly increased the money supply available to banks, injecting 600 billion yuan ($86.4 billion) via 14-day repurchase agreements. This action ended a two-month pause and aims to ensure banks can meet the heightened demand for cash anticipated during the upcoming Lunar New Year holidays.

This injection is crucial for addressing an estimated liquidity gap of 3.2 trillion yuan. Factors contributing to this gap include increased holiday spending, substantial government bond issuance, and strong corporate demand for the yuan. The PBOC's proactive measures are essential to prevent a seasonal cash crunch and sustain economic momentum.

Analysts predict that the PBOC will continue to provide liquidity through various tools, potentially adding up to 3.5 trillion yuan before the holidays commence. Beyond immediate cash injections, economists foresee the PBOC further supporting the economy by potentially reducing banks' reserve-requirement ratios by 50 basis points and cutting interest rates this year.