China’s Central Bank Injects Over $281 Billion to Its Banking System

China’s central Bank – People’s Bank of China – announced that it has conducted $281.27 million of seven-day reverse repos at an interest rate of 1.8% on Friday.

The move aims to keep liquidity reasonable and ample in the banking system, the People’s Bank of China said in a statement. A reverse repo is a process in which the central bank purchases securities from commercial banks through bidding, with an agreement to sell them back in the future.

This is the second such decision by the China’s central bank, which injected liquidity into the banking system through reverse repos and medium-term lending facility (MLF) on January 14 this year to keep liquidity reasonable and ample.

The People’s Bank of China conducted $12.52 billion of seven-day reverse repos at an interest rate of 1.8% early this year. A total of $137.34 billion was also injected into the market via the MLF, which will mature in one year at an interest rate of 2.5%, unchanged compared with previous operation.

With $107.52 billion worth of MLF loans set to expire at the end of January this year, the operation a fortnight before resulted in a net injection of $29.81 billion in fresh funds into the banking system.

Earlier Too

It may be recalled that the China’s central bank pumped cash into the money market in November to meet the liquidity demand from financial institutions.

Around $204 billion was injected into the market via the medium-term lending facility (MLF) in November last year to maintain liquidity in the banking system at a reasonably sufficient level, the China’s central bank said at that time.

The funds will mature in one year at an interest rate of 2.5%. The total outstanding MLF loans reached nearly 6.28 trillion yuan at the end of November. The MLF tool was introduced in 2014 to help commercial and policy banks maintain liquidity by allowing them to borrow from the central bank using securities as collateral.

Another $680 million was lent to financial institutions through the standing lending facility to meet provisional liquidity demand in November 2024.