Select Language:
The country’s central bank has implemented outright reverse repurchase operations along with government bond trading to infuse liquidity into the financial system, addressing the increased cash demand ahead of the Chinese New Year holiday.
Announced yesterday, the central bank plans to conduct a CNY800 billion (approximately USD115.3 billion) three-month outright reverse repo today. Since CNY700 billion in three-month outright reverse repos will mature this month, this action will result in a net liquidity injection of CNY100 billion.
This marks the first time since last November that the central bank has expanded the scope of its three-month outright reverse repos. The move aims to prevent potential liquidity shortages and maintain a stable, ample financing environment heading into the holiday season, according to Wang Qing, a chief macroeconomic analyst at a leading credit rating agency.
Outright reverse repo operations, a tool introduced by the central bank in 2024 for injecting liquidity, generally involve one three-month and one six-month operation each month to offset maturing funds.
Looking ahead, the bank is expected to execute a six-month outright reverse repo around February 15, likely renewing or increasing the CNY500 billion due to mature this month, said Dong Ximiao, chief economist at a major consumer finance firm. Additionally, a medium-term lending facility operation is scheduled around February 25, which is also expected to be rolled over or increased.
Moreover, the central bank revealed details of its monetary policy tools used in January, including a net liquidity injection of CNY100 billion via open market operations through government bond transactions. This injection is double that of the previous month.
Such a significant liquidity boost has lessened the chances of an imminent reserve requirement ratio cut, especially with Chinese New Year approaching. The upcoming holiday will run from February 15 to 23 this year, marking a one-day extension that makes it the longest holiday on record.
ChatGPT
Perplexity
Gemini AI
Grok AI
