China’s central bank injected 506.39 billion yuan ($73.43 billion) into the financial system via short- and medium-term liquidity tools in April, down 18 percent from the previous month, sigalling a bid to rein in rapid credit growth. The fall followed a 50 percent month-on-month jump in injections in March and a 35 percent drop in February. Under its new “prudent and neutral” policy, the People’s Bank of China (PBOC) has adopted a modest tightening bias in a bid to cool explosive growth in debt, though it is treading cautiously to avoid hurting economic growth. The PBOC lent 495.5 billion yuan to financial institutions via its medium-term lending facility (MLF) in April, the bank said in a statement on Tuesday. The outstanding MLF was 4.108 trillion yuan at the end of April compared with 4.064 trillion yuan at the end of March, it said, implying a net injection of 44 billion yuan.
The bank lent 128 billion yuan for six months and 367.5 billion yuan for one year. Meanwhile, the central bank extended 10.89 billion yuan of loans to financial institutions in April via its standing lending facility (SLF), it said. Outstanding SLF loans were at 10.27 billion yuan at the end of April compared with 70 billion yuan at end-March, it said, implying a net drain of 59.7 billion yuan. The PBOC uses the MLF and the standing lending facility as tools for managing short- and medium-term liquidity in the country’s banking system.
On March 16, the central bank raised interest rates on its reverse repurchase agreements, SLF and MLF loans, following a rise in rates on the reverse repos and SLF in early February. China’s pledged supplementary lending (PSL) facility stood at about 2.3 trillion yuan at the end of April, compared with 2.216 trillion yuan at end-March, the central bank said.
($1 = 6.8958 Chinese yuan renminbi)