China’s central bank on July 4 halted open market operations for an eighth day in a row, stopping trade of reverse repos.
Reverse repos are part of a process in which the People’s Bank of China purchases securities from banks, with an agreement to sell them back in the future.
In a statement released on July 4, the central bank said the decision was based on the fact that liquidity in the banking system remains at a high level.
Having been suspended for eight consecutive days, an accumulated 45 billion yuan ($6.6 billion) of cash was drained from the market.
Altogether 250 billion yuan ($36.8 billion) of reverse repos will mature this week.
Rising fiscal spending near the end of June offset maturing reverse repos, the PBOC said in statement last week.
In the interbank market on July 4, the benchmark overnight Shanghai Interbank Offered Rate (Shibor), the cost at which Chinese banks lend to one another, declined by 3.03 basis point to 2.6897 percent. The decline in the Shibor represents an improvement in liquidity.
China has set the tone of its monetary policy in 2017 as prudent and neutral, keeping an appropriate liquidity level but avoiding excessive liquidity injections.