BEIJING: China's central bank injected 900 billion yuan (US$124.3 billion) into the banking system on Monday via one-year policy loans, as local governments step up selling bonds to ease debt burdens.
The People's Bank of China (PBOC) lent the medium-term facility (MLF) loans to financial institutions at 2.0 per cent, the central bank said in a statement. The PBOC conducts MLF operations toward the end of each month.
China's banking system faces increasing liquidity pressure toward year-end, with local government bond issuance up sharply as Beijing steps up efforts to reduce debt risks and stimulate the struggling economy.
November issuance is expected to exceed 1.3 trillion yuan (US$179.4 billion), the biggest monthly volume in a year, Reuters estimates.
"Liquidity may face some pressure this week due to maturing reverse repos, increasing bond issuance and month-end volatility in cash demand," Citic Securities said in a note.
The PBOC is increasingly likely to reduce banks' reserve requirements toward the year-end to ease liquidity pressure, the official China Securities Journal reported on Monday.