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RETAIL BANKING | Cesar Tordesillas, China
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China's central bank injects cash via open market

The People's Bank of China stopped draining liquidity from banks through its open market operations this week.

 

The PBOC, China's central bank, auctioned only one billion yuan or US$ 158 million U.S. dollars of three-month bills at an unchanged yield of 3.1618 percent.

Hedging against 107 billion yuan in bills and repurchase agreements due this week, the PBOC released 96 billion yuan into the money market  through open-market operations.

It was the PBOC's first net cash injection in four weeks through open-market operations after net liquidity drainage for three consecutive weeks.

Analysts said the PBOC's change of policy sent a signal for the country's credit-tightening measures to be selectively eased after Premier Wen Jiabao said on Oct. 25 in the northern municipality of Tianjin that China will fine-tune the country's macro control policies when the time is right.

Chen Lan, a research fellow with Guotai Junan Securities, said the central bank aimed to relieve liquidity pressure in the market by the net cash injection and sales suspension of three-year bills, which can freeze liquidity for a much longer term.

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