January 25, 2016
The largest cash injection by China’s central bank in three years brought net injections via its various lending tools for the month to more than 1 trillion yuan. The People’s Bank of China reportedly added 400 billion yuan ($61 billion) to the financial system, using reverse-repurchase agreements.
The move was part of an effort to hold borrowing costs down to support China’s economy without spurring a capital exodus, which drove the yuan to a five-year low this month.
The Chinese government is striving to boost GDP, which rose last year at the slowest pace in a quarter century, and at the same time prop up the exchange rate that’s led to a record $513 billion drop in the nation’s foreign-exchange reserves.
The People’s Bank of China’s unconventional monetary policy aims to rebalance the economy, but traditional tactics like interest rates and reserve-ratio cuts will continue, according to Fielding Chen, a Bloomberg Intelligence economist.