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China keeps cash engine running in ninth day of injections

In the longest run since December as it sought to meet a surge in seasonal demand for cash.
Image: Bloomberg

China’s central bank injected liquidity into the financial system for a ninth day in the longest run since December as it sought to meet a surge in seasonal demand for cash.

The People’s Bank of China pumped in 100 billion yuan ($15.5 billion) of cash with 14-day reverse repurchase agreements, resulting in a net injection of 40 billion yuan. The move may also have been aimed at calming jitters fueled by China Evergrande Group’s debt crisis.

China’s policy makers are taking steps to ensure there’s sufficient liquidity ahead of quarter-end regulatory checks and a one-week holiday at the start of October. Speculation is also building that the PBOC may deliver another cut in the reserve requirement ratio to prop up the economy and maintain ample cash in the system.

“There are a lot of maturities and big tax payment coming up in October,” said Khoon Goh, head of Asia research at Australia & New Zealand Banking Group Ltd. “There is a need to ensure ample liquidity and there is a chance of a reserve requirement ratio cut before the long Golden Week holiday.”

The central bank has added a total net 750 billion yuan via open market operations since Sept. 17. A total of 740 billion yuan of 14-day reverse repurchase agreements will fall due on October 8-13. Later in the month, 500 billion yuan of medium-term lending facility is set to expire.

Overnight interbank funding costs slid 41 basis points to 1.50%, the lowest since May, after the cash infusion.

The injection is also expected to allay fears of a contagion stemming from Evergrande’s debt problems. The developer faces another bond interest payment Wednesday after giving no indication that it had paid a separate one last week.

© 2021 Bloomberg

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