People’s Bank of China’s liquidity injection failed to ease liquidity21 August, 2012, 23:41. Posted by Zarathustra
The People’s Bank of China today injected RMB220 billion of liquidity into the banking system via reverse repo.
According to Sina, there are about RMB33 billion of central bank bills and repo maturing this week, while RMB120 billion of reverse repo is maturing this week, thus without the latest reverse repo, the PBOC would have withdraw RMB87 billion from the system. Thus including today’s injection, the net injection of the week so far would be about RMB133 billion.
Despite huge injection through reverse repo, the amount of liquidity made available is not quite close to a 50 bps cut in reserve requirement ratio, which could probably made more than RMB400 billion available.
The chart below shows the PBOC open market operations’ injection/withdrawal up till last week.
Source: PBOC, CFETS
Despite injections in the recent weeks, as FT Alphaville noted, liquidity condition does not seem much improved. The chart below shows the SHIBOR curve. As of today, 2-week SHIBOR is higher than the longer-end.
The chart below shows the short-end of SHIBOR. As you can see, they are creeping higher of late despite liquidity injection.
The on-going money outflow from China has indirectly tightened liquidity condition within China, thus liquidity inject is in part to offset the liquidity tightening due to money outflow. So far, the action does not appear to be enough even to maintain liquidity.