SHANGHAI • China's central bank yesterday made its biggest daily net cash injection via reverse repo operations on record, more evidence that the authorities are shifting to policy easing to counter a slowdown.
The People's Bank of China (PBOC) said the injection was to maintain "reasonably ample" liquidity in the banking system. It attributed the generous liquidity support to the current peak period for tax payments, adding that "the banking system's overall liquidity is falling rapidly".
In open market operations, the PBOC injected 350 billion yuan (S$70 billion) through seven-day reverse bond repurchase agreements and 220 billion yuan through 28-day reverse repos.
On a net basis, the PBOC injected 560 billion yuan for the day, as 10 billion yuan reverse repos were set to mature yesterday.
Last month's "abysmal" trade data and manufacturing contraction have "translated to a consensus by the authorities that the economy needs more decided support and today's large injection reflects that", said Ms Trinh Nguyen, a senior economist for emerging Asia at Natixis in Hong Kong. "The news is clear - the economy needs help."
Head of fixed income research at Citic Securities in Beijing Ming Ming said the fund injection was to counter seasonal factors, including tax payments and rising cash demand for the Chinese New Year holiday early next month.