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China central bank drains 20b yuan from money market

Updated: Aug 4,2017 4:32 PM     Xinhua

BEIJING — China’s central bank drained 20 billion yuan ($3 billion) from the financial system through open market operations on Aug 4, with the volume of maturing securities exceeding new injections.

The People’s Bank of China pumped 120 billion yuan through reverse repos, with 140 billion yuan of contracts maturing, leading to a net withdrawal of 20 billion yuan.

The operations included 90 billion yuan of 7-day reverse repo priced to yield 2.45 percent, and 30 billion yuan of 14-day contracts with a yield of 2.6 percent.

This marked the second consecutive day of liquidity drain in the money market.

China’s central bank is being pulled in many directions by competing objectives, but nimble use of diverse monetary tools is helping to ease tensions and meet the country’s monetary goals.

Over the past year, the bank has steered clear of interest rate cuts and avoided tinkering with reserve requirement ratios. An expanded range of tools, such as reverse repos and lending facilities, are managing liquidity and supporting growth.

China’s monetary policy in 2017 is set to be prudent and neutral, keeping appropriate liquidity levels and avoiding large injections.