China steps up liquidity with 2b yuan reverse repo

China’s central bank injected 2 billion yuan ($281.3 million) into the financial system on Monday through a seven-day reverse repo, aiming to maintain an adequate level of liquidity within the banking system, Xinhua reported on Monday.

The People’s Bank of China (PBC) conducted the reverse repo at an interest rate of 1.8 per cent. This action is a common tool used by central banks to manage liquidity in the financial system.

In a reverse repo, the central bank purchases securities from commercial banks with an agreement to resell them at a later date.This injects cash into the banking system, promoting lending activity.