China injects $124 bn into banking system via one-year policy loans

China's central bank injected 900 billion yuan ($124.3 billion) into the banking system on Monday via one-year policy loans, as local governments step up selling bonds to ease debt burdens.

  The People's Bank of China (PBOC) lent the medium-term facility (MLF) loans to financial institutions at 2%, the central bank said in a statement. The PBOC conducts MLF operations toward the end of each month.

  China's banking system faces increasing liquidity pressure toward year-end, with local government bond issuance up sharply as Beijing steps up efforts to reduce debt risks and stimulate the struggling economy.

  November issuance is expected to exceed 1.3 trillion yuan ($179.4 billion), the biggest monthly volume in a year, Reuters estimates. 

 

"Liquidity may face some pressure this week due to maturing reverse repos, increasing bond issuance and month-end volatility in cash demand," Citic Securities said in a note.

  The PBOC is increasingly likely to reduce banks' reserve requirements toward the year-end to ease liquidity pressure, the official China Securities Journal reported on Monday.