China central bank offers most cash support since 2020 as debt sales surge
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China is ramping up debt sales to finance stimulus spending, reinforcing the need for more liquidity in the financial system.
PHOTO: REUTERS
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HONG KONG – China’s central bank is stepping up efforts to support the nation’s economic recovery and debt sales with its biggest medium-term liquidity injection since 2020.
The People’s Bank of China (PBOC) pumped a net 289 billion yuan (S$55 billion) into the financial system via a one-year policy loan on Monday, the most since December 2020.
It kept the interest rate unchanged at 2.5 per cent, in line with expectations.
The nation is tussling with a stuttering economy, with consumer prices reflecting weak demand
Beijing as well as local governments are ramping up debt sales to finance stimulus spending, reinforcing the need for more liquidity in the financial system.
The cash injection should “offset the demand from government bond supply this week”, said Mr Xing Zhaopeng, senior China strategist at Australia and New Zealand Banking Group.
“The tight liquidity may ease in the second half of October, as the authorities mandated local governments to spend all money raised by bonds before the end of the month,” he said.
The move by PBOC comes as Beijing considers a new round of stimulus to help the economy meet the official annual growth target of around 5 per cent.
Official data on Friday showed a surprise flatlining of the consumer inflation rate in September, though other recent indicators such as exports have suggested the slowdown may be moderating.
The authorities have rolled out piecemeal measures to buttress the economy, but refrained from big stimulus.
China’s monetary policy will make better use of both aggregate and structural tools, central bank chief Pan Gongsheng said in a statement on Saturday, referring to broad moves that affect overall liquidity and targeted ones to aid certain industries.
China will seek more sustainable growth while maintaining a “reasonable” expansion pace, he said.
Though markets are still cautious about the precarious economic recovery, financial institutions ranging from Citigroup to JPMorgan Chase & Co upgraded targets for China’s economic growth earlier in October after some improvement in indicators, including manufacturing activity. BLOOMBERG
