BEIJING: China’s central bank launched a new lending tool on Monday (Oct 28) to inject more liquidity into the market and support credit flow in the banking system ahead of the expiration of trillions of yuan in loans at the end of the year.
The People’s Bank of China said in a statement it had activated the open market outright reverse repo operations facility to “maintain a reasonable abundance of liquidity in the banking system and further enrich the central bank’s policy toolbox”.
Some 2.9 trillion yuan (US$406.58 billion) in medium-term loans are due to mature between now and the end of December, which would make it harder for banks to finance investment and revive flagging growth in the world’s second-largest economy.
Despite taking effect today, the PBOC did not mention the new tool in Monday’s open market operations statement.
In a separate statement announcing the new facility, the PBOC said it would use it to trade with primary dealers in OMO on a monthly basis.
The announcement said the new tool would have a tenor of less than one year, longer than those for regular reverse repo operations, which typically have tenors of seven, 14 or 28 days, are conducted daily and normally require collateral.
