China injects $233b in year-end liquidity boost

China’s central bank injected 1.7 trillion yuan ($233 billion) into the financial system in December, ramping up liquidity to support the economy and stabilise financial markets.

The People’s Bank of China (PBC) deployed 1.4 trillion yuan through three- and six-month reverse repurchase agreements and purchased a net 300 billion yuan in treasury bonds, the central bank revealed.

This marked the fifth consecutive month of net treasury bond purchases, adding cash to the market as policymakers aim to sustain liquidity amid rising year-end demand. The measures align with the government’s pledge for “moderately loose” policies to counter economic challenges, including escalating trade tensions and deflationary pressures.

The PBC’s shift toward newer tools, such as short-term interest rates over medium-term facilities, reflects efforts to enhance liquidity management and align with global practices. Large-scale bond purchases have also driven down yields, with 10-year government bonds closing at a record low of 1.67 per cent.

Analysts anticipate further liquidity injections through reverse repos and bond purchases as the central bank maintains its accommodative stance to navigate economic uncertainties.

Attribution: Bloomberg

Subediting: Y.Yasser