The Chinese central bank injected 298 billion yuan (USD$45.79 billion) in liquidity via medium-term lending facilities with rates of 3.2% on 7 September, yet refrained from conduct any further repo operations.
According to the open market operations office of the People’s Bank of China the injection serves to offset the 283 billion yuan of MLF that are scheduled to mature in September, as well as unleash medium and long-term funds to provide stability with respect to end-of-quarter liquidity risk.
PBOC points out that September is a key month for fiscal expenditures which will have a significant impact on liquidity, while the pressure brought to bear by macro-prudential assessments is gradually diminishing, which means that the current month will be subject to less stress than March or June.
Given comparatively low excess reserves, however, caution must be exercised with respect to raising leverage levels, and the central bank will still guard against intermittent or structural monetary tightness.
PBOC points out that net financing via interbank certificates of deposit has already seen improvements after the central bank announced that the instruments would be included in macro-prudential assessments next year.