China boosts bank liquidity with $85 billion fund injection

SHANGHAI (AFP) - China's central bank has stepped up its efforts to pump more cash into its banking system with a 400 billion yuan (S$85 billion) fund injection, Dow Jones Newswires reported Thursday.

The People's Bank of China (PBoC) on Wednesday injected around 400 billion yuan into the interbank market where banks borrow from each other, Dow said, citing people familiar with the matter.

It came after an earlier 500 billion yuan injection into the country's five biggest state-owned banks in September through a tool to manage short-term liquidity, according to state-run media. The loans were set to expire this month.

The latest fund injection has not been made public by the PBoC for fear that the market might read it as a strong signal of a broad monetary easing, Dow cited the sources as saying.

China's central bank has repeatedly said it will maintain a "prudent" monetary policy, though it resorted to so-called "targeted" cuts in the amount of money some banks must put aside to encourage lending, and cut interest rates in a surprise move in late November.

But some large Chinese banks are pressing for more, seeking an overall cut in the their reserve requirement ratios (RRR), Dow reported Monday citing unnamed sources.

Analysts have foreseen more RRR cuts to replace the "covert" fund injections to boost the economy.