Chinese Central Bank Injects Record Single Day Liquidity on Wednesday

The People’s Bank of China made a record injection of liquidity on 17 January 2019, prompting concerns about the country’s economic fettle.

The Chinese central bank injected 560 billion yuan into the banking system via an auction of reverse repo agreements on Wednesday, for the highest single-day net injection on record.

This included 350 billion yuan in 7-day repos at a rate of 2.55%, and 220 billion yuan in 28-day repos at a rate of 2.85 billion yuan, for 570 billion yuan in repos to offset

According to figures from Wind data China’s second-highest one day net injection was made in January 2016, when its economy had met with difficulty

In an official statement PBOC said that “total liquidity in the banking sector is rapidly declining,” and that its open market operations on Wednesday were intended to “maintain rationally ample liquidity in the banking system.”

Ting Lu, Nomura’s chief economist for China, said to CNBC that PBOC is “stepping up monetary easing,” although what is likely a seasonal open market operation should not be confounded with a long-term expansion in liquidity.

“This reflects an increasing caution of the PBOC to stabilise interbank rates and bond yields to offset potential liquidity shocks.”

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