share this article!

The People’s Bank of China (PBOC), the country’s central bank, is seen in Beijing, China, on September 28, 2018. Jason Lee/Jason Lee/Jason Lee/Jason Lee/Jason Lee/ (Reuters) – SHANGHAI, July 15 – On the same day that a reduction in banks’ reserve requirements takes effect, China’s central bank partially rolled over maturing medium-term loans. In a statement, the People’s Bank of China (PBOC) said it will maintain the 2.95 percent interest rate on 100 billion yuan ($15.46 billion) in one-year medium-term lending facility (MLF) loans to some financial institutions. The new funds were insufficient to cover all of the expiring MLF loans, which totaled 400 billion yuan and were due on the same day. According to an online statement from the PBOC, the capital injection was intended to “maintain banking system liquidity reasonably sufficient” because many institutions still had mid- to long-term cash demand throughout the tax collection season. The People’s Bank of China (PBOC) reduced the amount of cash banks must maintain as reserves last week, releasing about 1 trillion yuan in long-term liquidity to support China’s post-COVID economic recovery, which is losing steam. MLF loans are rather expensive when compared to the long-term low cost of capital through RRR cuts, and a total of 3.75 trillion yuan worth of MLF loans are slated to expire this year. The PBOC had stated in its RRR cut decision that it would use some of the liquidity released to assist financial institutions in repaying maturing MLF loans, but it did not provide any additional information in its statement on Thursday. China’s unexpected RRR drop, on the other hand, has fueled speculation about more monetary easing to support the economy. According to some market experts, the country’s benchmark lending prime rate could be slashed as soon as next week. find out more “Overall, we expect Beijing’s measures to carefully manage the conflicting aims of lowering carbon emissions, curbing commodity price rises, and sustaining economic recovery,” Eugenia Victorino, SEB’s head of Asia strategy, said earlier this week. The PBOC also said that it has infused additional 10 billion yuan in the financial system in the form of seven-day reverse repos, offsetting the equivalent amount of loans due on the same day. (1 US dollar = 6.4688 Chinese yuan) Winni Zhou and Andrew Galbraith contributed reporting, and Jacqueline Wong and Kim Coghill edited the piece. The Thomson Reuters Trust Principles are our standards./nRead More

share this article!