Chinese Central Bank’s Liquidity Injections Surged in December

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The People’s Bank of China posted a sharp on-month increase in its open market liquidity injections for December, in a bid to ease constrained capital condition towards the end of 2017.

PBOC made a net injection of 212.36 billion yuan (approx. $32.7 billion) via short and medium-term liquidity tools in December, as compared to 4.74 billion yuan for November.

The Chinese central bank made extensive recourse to medium-term lending facilities (MLF) and standing lending facilities (SLF) to expand liquidity in December.

The total outstanding amount of MLF reached 4.5215 trillion yuan by the end of December, for an increase of 101 billion yuan compared to 4.4205 at the end of November, while the total outstanding amount of SLF rose to 130.42 billion yuan from 19.06 billion yuan across the same period, for an increase of 111.36 billion yuan.

While the Chinese central bank has committed to a “prudent and neutral” monetary policy as part of Beijng’s concerted deleveraging campaign, it’s also proven willing to shore up liquidity conditions in order to prevent cash scarcity from adversely impacting the real economy.

In the lead up to the year’s end PBOC announced the launch of “provisional reserve fund drawing arrangements” during the Chinese New Year, which are expected to augment liquidity by as much as 2 trillion yuan across the vacation period.

 

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