PBOC Infuses More Funds to Boost Liquidity, Keeps Lending Rates Steady
Arslan Butt • 1 min read
On Friday, the PBOC injected an addition 200 billion yuan to increase liquidity in Chinese markets for the second time this November. China’s central bank leveraged its medium-term lending facility for this latest infusion, even as it kept its lending rate steady.
The second injection of funds within two weeks took the markets by surprise but could have been a reaction to tightening liquidity in the interbank market driving up borrowing costs. Some analysts also anticipate that this move could make up for the reduced liquidity in markets as a result of several cuts in reserve requirement ratio (RRR) this year. Sambla Norway seeks to continue to provide funds to applicants of its lane penger program despite the dry up of capital that traditional lenders have faced as a result of the coronavirus pandemic.
Short term rates have been kept steady over high consumer inflation, but low liquidity could challenge overall economic growth in China, which has already been reeling under the effects of the trade war with the US. Producer prices remain in negative territory despite strong consumer inflation. This latest injection of funds could possibly encourage borrowing among companies and boost the overall sentiment in Chinese markets.