Chinese Central Bank Plans Extension of Maturing Medium-term Lending Facilities in Middle of June

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The People’s Bank of China (PBOC) has flagged the extension of a swathe of medium-term lending facilities (MLF) scheduled for maturation in mid-June.

PBOC said on 8 June that it would extend MLF maturing around 15 June, with the specific amount to be determined based on market conditions.

In June 740 billion MLF are scheduled to mature, for the highest volume on record.

Bank of China researcher Li Peijia (李佩珈) said that looking at fiscal deposits, maturing MLF and funds outstanding for foreign exchange, June is likely to see an expanding shortfall in funds, and needed an expansion in monetary policy tool support measures.

Enterprises in China make their tax payments in June, which will lead to an increase in fiscal deposits, leading to a reduction in the money supply.

On 8 June 500 billion yuan in MLF matured, while PBOC also undertook 120 billion yuan in reverse repo operations with a term of seven days and a rate of 2.20%, for a net injection of 380 billion yuan to “maintain rational liquidity in the banking system.”

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