China pumps cash into banks in a bid to ac­cel­er­ate growth

The Pak Banker - - COMPANIES/BOSS -

BEIJING: China's cen­tral bank has bol­stered support for the cool­ing Chi­nese econ­omy by in­ject­ing another 50 bil­lion yuan ($8.1 bil­lion) worth of short-term loans into banks to spur growth from a 24-year low.

The Peo­ple's Bank of China (PBOC) said it is­sued an ad­di­tional 50 bil­lion yuan worth of three-month loans to mid- and small-sized banks while rolling over 269.5 bil­lion yuan of sim­i­lar loans that have ex­pired.

The re­marks were pub­lished on the PBOC's Weibo ac­count, China's ver­sion of Twit­ter. There were no de­tails about when the loans were added or rolled over, only that it hap­pened re­cently. The move fol­lowed data on Tues­day that showed the world's sec­ond-largest econ­omy grew 7.4 per cent last year, the weak­est rate since China was hit by sanc­tions in 1990 after the Tianan­men Square crack­down. The growth re­port was not as bad as some had feared, but it sug­gested that China's econ­omy is not about to make a dra­matic re­bound, de­spite a sur­prise in­ter­est rate cut in Novem­ber and re­peated cash in­jec­tions by the cen­tral bank.

This was the sec­ond time in two weeks that the PBOC has poured cash into banks. It said on Fri­day it would lend banks 50 bil­lion yuan at a dis­counted rate so that the funds can be re-lent to farm­ers and small busi­nesses. The PBOC said its lat­est loan in­jec­tion was made via the "medium-term lend­ing fa­cil­ity", a pol­icy tool cre­ated last year to pump cash into banks to keep short-term in­ter­est rates low.

The PBOC said the loans were dis­pensed at an in­ter­est rate of 3.5 per cent to keep money mar­ket rates sta­ble be­fore the Spring Fes­ti­val, or Lu­nar New Year hol­i­day. The bench­mark one-year lend­ing rate stands at 5.6 per cent.

The loans were ex­tended to joint-stock com­mer­cial banks, and city and ru­ral com­mer­cial banks, the PBOC said. China's short-term in­ter­est rates have spiked in the past be­fore pub­lic hol­i­days as res­i­dents with­draw cash from banks for cel­e­bra­tions. The cu­mu­la­tive im­pact of the PBOC's cash in­jec­tions can be size­able. In Novem­ber, the cen­tral bank lent some 769.5 bil­lion yuan to banks un­der the medium-term lend­ing fa­cil­ity, a move that in­jected more funds into the sys­tem than if it had low­ered the re­serve re­quire­ment ra­tio by 50 ba­sis points.

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