The People’s Bank of China conducted 220 billion yuan ($34.6 billion) of reverse-repurchase operations, the most in a single day, according to a trader at a primary dealer required to bid at the auctions. The government may introduce new policies to boost consumers’ borrowing and spending this year, the Economic Information Daily reported today, citing an unidentified person.
We’ve written a lot about Chinese liquidity and how the PBoC is changing its approach to managing it in recent months, as foreign inflows dry up and the shadow banking system shows signs of strain. Yes, the PBoC has plenty of other tools, but they are not infinite.
To put the Rmb220bn in context, here’s a chart of the past few months PBoC liquidity operations, including reverse repo:
The usually-restrained Bloomberg News referred to this in two stories as being in response to a “cash crunch”. The WSJ took a dark tone last week reporting that Chinese banks’ becoming sellers of yuan indicated ‘hot money’ outflows.
Chinese banks’ Weapons of Mass Ponzi – FT Alphaville
China’s two-way liquidity risk: Capital outflows and Shadow banking – FT Alphaville
Why China’s Rmb exodus is THE story – FT Alphaville