China’s central bank injects $55 billion to boost market liquidity

Global Business

A Chinese yuan currency sign with two arrows is pictured outside a bank branch in Shanghai on August 13, 2015. AFP PHOTO / JOHANNES EISELE

China’s central bank, the People’s Bank of China, unleashed a total of 350 billion yuan ($54.8 billion) into the market earlier this week as a hedge against the currency’s weakness.

The PBOC released short-term liquidity through two cash injections valuing 120 billion yuan ($18.8 billion) via seven-day reverse-repurchase agreements respectively on Monday and Wednesday. It also released mid-term liquidity of 110 billion ($17.2 billion) through Medium-term Lending Facility (MLF).

Analysts said the central bank made the decision in a bid to ensure an adequate supply of money to maintain financial stability.

Further monetary easing policies are expected, including lowering its benchmark interest rate.

China faces a major challenge from both the slowing down of the national economy and its currency depreciation.

Market surveys forecasted China’s forex reserves will shrink by some $40 billion a month for the rest of this year, as the central bank continues to buy the Chinese currency.