Drought ends with 10b yuan PBOC injection

Business | Agencies and Winnie Lee 27 May 2020

China's central bank injected 10 billion yuan (HK$10.87 billion) into money markets yesterday through seven-day reverse bond repurchase agreements, breaking a near two-month hiatus with no fresh fund injections via the liquidity tool, traders said.

Peoples Bank of China Governor Yi Gang said China will strengthen its economic policy and continue efforts to lower interest rates on loans, though banks may face pressure on disposing of bad loans.

The PBOC kept the borrowing cost on seven-day reverse repos unchanged at 2.2 percent.

The bank last injected cash via reverse repos on March 31.

Markets are now looking out for the seven-day reverse repo rate, which will be announced soon. It is currently at 2.2 percent.

The PBOC also plans to roll out more measures to enable small firms to delay repayment of loans and interest, increase collateral-free credit to small companies, improve the government's associated credit guarantees, support corporate bond sales and develop supply-chain finance, Yi said in a local-media interview, according to a statement published on the PBOC's website.

Banks will likely face increasing pressure from non-performing loans, and the PBOC will support them to replenish capital, he said.

The central bank will deepen reform of the loan prime rate, the benchmark lending rate, to help lower real lending rates, and will steadily unify benchmark deposit, lending rates and market interest rates, he said.

Even faced with global turmoil, the improving momentum of the domestic economy won't change, Yi added.

Yi didn't specify if the monetary authority would roll out new instruments to deal with the impact of the pandemic but signaled the moderate approach to stimulus would continue.

On the PBOC's digital currency plan, Yi said there was still no timetable on a formal launch yet, and its current trials in some cities are part of routine research and development.

AXA Investment Managers Asia forecasts China's economy will grow 2.3 percent this year despite facing three risk factors - Sino-US tension, government policy and virus development.

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