China's central bank injects $30.4b liquidity into market

China's central bank pumped cash into the financial system through open market operations to maintain liquidity in the market.

A total of 200 billion yuan ( about 30.4 billion U. S. dollars) was injected into the market via medium- term lending facility ( MLF), according to the People's Bank of China, the central bank. The funds will mature in one year at an interest rate of 2.95 percent.

Meanwhile, the central bank injected 150 billion yuan into the market through seven- day reverse repos at an interest rate of 2.2 percent. The move was intended to maintain stable liquidity in the banking system at the end of the month, the central bank said.

The MLF tool was introduced in 2014 to help commercial and policy banks maintain liquidity by allowing them to borrow from the central bank using securities as collateral.

A reverse repo is a process in which the central bank purchases securities from commercial banks through bidding, with an agreement to sell them back in the future.

China pursues a prudent monetary policy in a more flexible and appropriate way, according to this year's government work report.

China's factory activity grew at its fastest pace in over three years in November, official data showed, as the world's secondlargest economy continued its recovery from the coronavirus.

The Purchasing Managers' Index ( PMI), a key gauge of manufacturing activity in China, has largely rebounded following strict measures to curb the virus outbreak early in the year, coming in at 52.1 this month.

This was higher than October's reading of 51.4, and remains above the 50- point mark separating growth from contraction.

The latest figures also bring the PMI data back to levels seen in September 2017.

Zhao Qinghe, senior statistician at the National Bureau of Statistics ( NBS) -- which publishes the PMI- said that both the production and new order indexes edged up and that "the supplydemand cycle has continued to improve".

Both sub- indexes fared well in industries relating to high- tech manufacturing such as pharmaceuticals, electrical machinery and equipment, he added.

But recovery in the manufacturing industry remains "uneven", Zhao said, and official data showed that small enterprises, which were hurt more by the Covid- 19 outbreak, continued to lag behind large businesses.

China is expected to be the only major economy to record positive growth this year.

The non- manufacturing PMI came in at 56.4 in November, slightly higher than the month before, signalling further recovery in the services sector.

Lu Ting, chief China economist at Nomura, an investment bank, said in a recent note that data suggested "decent" growth momentum remains in some hightech industries.

Others like blast furnace operation rates appear to be running out of steam- partly due to antipollution measures- adding pressure to the production of industrial products such as steel and cement.

But on the non- manufacturing side, Lu warned that recent sporadic Covid- 19 outbreaks in Shanghai, Tianjin and Inner Mongolia could slow the pace of recovery in some service industries.