PBoC injects over $232bn in liquidity

China’s central bank injected 1.53tn yuan ($232.59bn) in liquidity ahead of the Lunar New Year festivities to avoid a cash crunch in the lead up to the holiday season. China’s central bank lent 862.5bn yuan to financial institutions in January via its medium-term lending facility (MLF), it said in a statement yesterday. Outstanding MLF was 1.28tn yuan at the end of January compared with 665.8bn yuan at the end of December 2015. China’s outstanding standing lending facility (SLF) was 110mn yuan at the end of January, the PBoC said yesterday, and the central bank injected a total of 520.9bn yuan via the SLF in January alone. Separately, the central bank disbursed 143.5bn yuan worth of pledged supplementary loans, or PSL, to policy banks in January. The outstanding PSL stood at 1.22tn yuan at end-January, compared with 1.08tn yuan a month earlier. The People’s Bank of China (PBoC) has increased open market operations and repeatedly used short and medium term lending tools to avoid a cash crunch ahead of the China’s new year. Ma Jun, the PBoC’s chief economist said in January that liquidity injections ahead of the Lunar New Year holidays could “imply a substitute for a cut in banks’ reserve requirement ratios (RRR)”. China’s central bank said in a statement the liquidity injections would be done through the MLF, SLF and PSL. According to sources, Zhang Xiaohui, an assistant governor at the PBoC, said the central bank could use other policy tools to add liquidity to the banking system but would not rush to cut the amount of cash banks must hold in reserves, as doing so could send a strong signal on policy easing. China’s central bank has cut interest rates six times since November 2014, and cut the amount of cash banks must hold as reserves, but such steps have had limited impact on economic growth. More easing steps are widely expected in coming months. China’s economic growth slowed to 6.8% in the fourth quarter, the weakest since the financial crisis, adding pressure on a government that is struggling to restore investor confidence.