China's central bank injects $112 bn of cash to revive economic growth

By Tania Chen

China’s central bank injected the most cash via one-year policy loans on record, as it seeks to support an economy suffering from a housing slump and weak demand.
 

The People’s Bank of China offered commercial lenders 1.45 trillion yuan ($204 billion) via its medium-term lending facility — 800 billion yuan more than the expected maturity this month. The net injection was more than twice the amount seen by analysts surveyed in a Bloomberg survey and was also larger than the infusion last month. 

“MLF injection is much larger than expected, so it suggests continued easy monetary policy,” said Becky Liu, head of China macro strategy at Standard Chartered. This means China won’t cut the reserve-requirement ratio for banks anytime soon, she added. 

The continuation of funding support underscores Beijing’s difficult task of selling an additional 1 trillion yuan in the last quarter of the year to finance stimulus. Economists will be closely watching industrial production and retail sales figures due Friday for clues on the pace of recovery and whether the government will need to provide more support. 

China’s economy has struggled this year as a rebound from restrictive Covid Zero policies proved to be weaker than expected and the property crisis deepened. Data showed both manufacturing and services activities shrank in November, bolstering a belief that more government action is needed to support a faltering recovery.

The rate on the one-year loans was kept unchanged at 2.5%. 

“The injections are more than enough to cover additional bond supply – with the remainder potentially being used to support loan extension,” said Frances Cheung, a rates strategist a Oversea-Chinese Banking Corp. in Singapore. “Looking further ahead, China’s government bonds shall react to the potential growth recovery and we maintain a mild upward bias to the yields and yuan rates.”