China’s central bank injects record $112b into financial system
SHANGHAI: China's central bank injected a record US$83 billion (S$112 billion) into the country's financial system yesterday, seeking to avoid a cash crunch that would put further pressure on the weakening economy.
China's policymakers are pledging to step up stimulus measures this year and do more to protect jobs as economic growth cools to 28-year lows.
But a raft of measures last year from big rail projects to tax cuts seem to have had little impact so far, with recent data suggesting activity is cooling more quickly than expected.
"The news is clear - the economy needs help," said Ms Trinh Nguyen, senior economist for emerging Asia at Natixis in Hong Kong.
Yesterday's open-market operation, the bank's largest net single-day injection on record, came a day after China's state planner, central bank and finance ministry all offered reassurances to investors, signalling more spending and other types of policy support.
But weak December trade data released earlier this week, along with shrinking factory activity, are stirring speculation over whether more rapid and aggressive policy measures are needed to turn the world's second-largest economy around.
Authorities now agree the economy needs more decisive support "and today's large injection reflects that", Ms Nguyen added.
The People's Bank of China (PBOC) said yesterday's injection was aimed at ensuring there are ample funds in the financial system, which is facing strains as tax payments peak in mid-January, and as demand for cash picks up ahead of the Chinese New Year holidays starting next month.
While sizeable injections are common this time of year ahead of the long holidays, the addition was much heftier than usual and follows a large cut in banks' reserve ratios announced this month, which will free up a total of US$116 billion for new bank lending. - REUTERS