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China injects more than $31 billion in the economy to ease liquidity tensions

The People’s Bank of China (BPC) on Tuesday injected 200,000 million yuan ($31 billion) in the short term through a refinancing operation (repo) in which it applied an interest rate of 2.20%, according to the entity.

China injects more than $31 billion in the economy to ease liquidity tensions

China injects more than $31 billion in the economy to ease liquidity tensions

The operation took place after this Monday the indicators of liquidity tensions in the market reached their highest levels since last September.

The volume-weighted average rate of the seven-day benchmark traded on the interbank market stood at 2.237% this Tuesday, compared to 2.4156% yesterday, when it marked its highest reading since September 29. Last week, the BPC cut the preferential interest rate for one-year loans by 5 basis points, placing the rate at 3.80% from 3.85%, in the first reduction applied since April 2020.

For its part, the Chinese central bank kept the preferential interest rate applied to five-year loans unchanged, which will continue at 4.65%. Previously, the BPC reduced the reserve requirement ratio for banks, thus freeing up extra liquidity to stimulate the economy, while keeping the medium-term rate at which the central bank lends to banks unchanged at 2.95%.

At the quarterly meeting of the Monetary Policy Committee of the BPC, held this weekend, the entity pointed out that the external environment is becoming more complex amid uncertainties due to the development of the pandemic, while China’s economic growth faces triple pressures , including the contraction of demand, supply shocks and weakening of expectations about the economy.

In this way and taking into account the situation, the BPC will give the highest priority to stability and will seek progress while guaranteeing stability, therefore it will coordinate monetary policies for this year and next, in order to promote a high-quality economic development.

“The PBC will take more proactive measures to boost support for the real economy,” the institution announced, ensuring that it “will maintain adequate liquidity at a reasonable level” and better stabilize aggregate credit growth, in order to ensure that the growth of the money supply and aggregate financing to the real economy are in line with nominal GDP growth and macroeconomic growth.

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