The Chinese central bank made a net injection of 20 billion yuan (approx. USD$2.92 billion) via open market operations on 3 September.
On 3 September the People’s Bank of China (PBOC) announced that it had undertaken 120 billion yuan in 7-day reverse repo operations with a rate of 2.20%, on par with the rate for its last operation.
Given that 100 billion yuan in reverse repos matured on 3 September, the operation resulted in a net injection of 20 billion yuan.
PBOC said that the reverse repo operation was for the purpose of maintaining rational liquidity in the Chinese banking system.
In August PBOC engaged in reverse repo operations for 15 consecutive work days, for a cumulative amount of 1.93 trillion yuan (USD$281.12 billion).
“With monetary policy stressing flexible moderation and targeted guidance, PBOC, the main reason that the central bank has expanded the vigour of reverse repo operations is to maintain rationally ample liquidity and avoid excessive tightening of funds, following a large scale increase in the supply of bonds and loans,” said Yuan Dongyang (袁东阳), a senior researcher with the China Chief Economist Forum (CCEF).