China pumps cash into banks in a bid to accelerate growth
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.