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23 October 2019
ECONOMY

China’s central bank boosts liquidity ahead of tax payment surge

The central bank injected a net CNY 490 billion in the four days through 25 October 2019 last year and acted last week to funnel CNY 200 billion in one-year funds into the system.

BLOOMBERG/GIULIA MARCHI


China’s central bank used open-market operations to inject the largest amount of cash into the banking system since May 2019, as upcoming corporate tax payments tighten liquidity conditions, reported Bloomberg.

The People’s Bank of China (PBOC) injected CNY 250 billion ($35 billion) via seven-day reverse repurchase agreements. There were no facilities coming and the central bank kept the rate steady at 2.55 per cent.

PBOC is acting to fine-tune interbank liquidity conditions while it keeps broader monetary-policy settings stable, seeking to keep credit growth appropriate while avoiding rapid debt build-up as the economy slows. The move comes before a 24 October 2019 deadline for companies to pay tax, which typically increases the demand for cash and tightens liquidity.

China’s policymakers are preparing for two key meetings in the coming weeks with fresh evidence that economic growth will slow below six per cent. Yi Gang, PBOC Governor responded to last week’s gross domestic product data not by hinting at much greater stimulus in the pipeline, but by reminding investors that China’s focus remains on keeping its heavy debt load under control.


RELATED STORIES: INTERBANK LIQUIDITY PEOPLE’S BANK OF CHINA STIMULUS

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