JAKARTA (TheInsiderStories) – People’s Bank of China (PBoC) added liquidity RMB300 billion (US$43.54 billion) to the market through the medium-term lending facility with rate 3.25 percent, the central bank announced on Jan. 14. The data showed, some RMB257.5 billion of medium-term loans will mature on Jan.
The Bank also injected RMB100 billion yuan via open market operations after a 15-day hiatus and selling 14-days reverse repurchase agreements at 2.65 percent. On Tuesday, PBoC also decided not to conduct reverse repo operations.
On Jan.3, the central bank has cut the reserve requirement ratio (RRR) for financial institutions or the level of cash that lenders must hold as reserves by 50 basis points. The move was expected to offset the liquidity shortage ahead of the Chinese Lunar New Year and to keep overall liquidity in the banking system basically stable.
Referring to the reduction as part of the country’ counter-cyclical adjustments, the official stressed that the stance of prudent monetary policy has remained intact and excluded the possibility of “flood-style” stimulus.
According to the PBoC, the blanket RRR cut will release about RMB800 billion of long-term funds, injecting liquidity and lowering financing costs for the real economy. With more than RMB120 billion in long-term funds to be unlocked for small and medium-sized lenders.
Earlier, Chinese Premier Li Keqiang promised to grant stronger support to small and medium-sized banks delivering direct services to small and micro-enterprises during an inspection tour in Chengdu, capital city of the southwestern province of Sichuan, saying that research into the use of multiple tools including the RRR will be carried out.
The cut also echoed the central bank‘ pledge during a meeting where it vowed to advance financial supply-side structural reform for high-quality development and guide financial institutions to step up loans to the real economy.
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