BEIJING: The People’s Bank of China (PBoC) is boosting the supply of money available to banks to ensure they can meet the surge in demand for cash during the Lunar New Year holidays.
The central bank injected a total of 600 billion yuan via a 14-day repurchase agreement late last week, ending a two-month hiatus for such operations.
Industrial Securities forecasts the PBoC to add as much as 3.5 trillion yuan of funds via similar tools before the holidays kick off on Sunday.
The injections would address a roughly 3.2 trillion yuan liquidity gap identified by Bloomberg calculations. Withdrawals related to holiday spending, heavy government bond issuance and surging corporate demand for the yuan are all expected to drain funds from the banking system.
For the PBoC, keeping the financial plumbing well-greased is essential to ward off a seasonal cash crunch and maintain economic momentum against mounting headwinds. Before the latest move, it doubled its bond purchases in January and added a record one trillion yuan of funds into the banking system. — Bloomberg
