People's Bank of China Injects Additional 53 Trillion Liquidity... Struggling to Boost GDP

Largest Money Injection in 3 Years Underway

China's central bank, the People's Bank of China (PBOC), has injected the largest amount of medium-term liquidity into the market in three years. This move is interpreted as an effort to boost the still-pressured economic growth rate.

On the 16th, the PBOC announced that it had conducted a 1-year medium-term lending facility (MLF) loan worth 789 billion yuan (approximately 146 trillion won) to appropriately maintain liquidity in the banking system. This involved extending the maturity of 500 billion yuan worth of MLF loans due and injecting an additional 289 billion yuan (approximately 53.5 trillion won), the largest amount in over three years since December 2020. The MLF interest rate remains unchanged at 2.50%. Additionally, 134 billion yuan of short-term liquidity was injected through open market operations.

[Image source=Yonhap News]

Becky Liu, Head of China Macro Strategy at Standard Chartered Bank, told Bloomberg News regarding this, "The additional liquidity injection aims to maintain a stable state of interbank liquidity," adding, "It reflects strong liquidity demand from commercial banks." Mingming, Chief Economist at CITIC Securities, said, "The MLF injection helps stabilize market liquidity supply," and forecasted, "The tight liquidity situation will ease, but there will be high volatility across the bond market."

The PBOC has cut the MLF rate, which serves as a guideline for China's benchmark interest rate, twice this year to stimulate consumption and respond to the real estate crisis. Liu expects that the PBOC may further lower the 1-year MLF rate by the end of the year.

Despite continuous liquidity easing by Chinese authorities, the local economic situation has not improved rapidly. The recently released September Consumer Price Index (CPI) growth rate recorded 0% year-on-year, falling short of both the previous month's figure (0.1%) and the forecast (0.2%).

The report views the central bank's move as part of the Chinese government's stimulus measures to achieve the official annual gross domestic product (GDP) growth target of "around 5%." In particular, many local governments in regions such as Liaoning and Chongqing are accelerating the issuance of special refinancing bonds to resolve outstanding debts this month. The report assesses that the Chinese government is providing more liquidity, including a 1 trillion yuan program to support the refinancing of hidden debts.

This content was produced with the assistance of AI translation services.