FX.co ★ People’s Bank of China injects 502 bln yuan into bank sphere

When it comes to the monetary policy issues, the People’s Bank of China spares no expense. Once it decided to stimulate the economy with a new tranche of money, surely enough it turned out to be a huge amount. The financial authorities injected 502 billion yuan which is equivalent to 74 billion US dollar into the bank sphere. Such actions prove that the bank is on its ways towards easing the monetary policy. A significant slowdown in economic growth prompted the bank to take a milder approach.

The cash was injected through giving credits to commercial banks. The People’s Bank of China provided one-year loans under the framework of medium-term lending facility which has become an indispensable tool for increasing the money supply in China. Remarkably, experts were surprised not by the volume of injections but by the fact that it has happened. The financial markets did not expect such a move under the present conditions. Usually, the Chinese central bank boosts liquidity by providing medium-term credits on the day of repayment of current loans. However, this time the policymakers did not wait and were one step ahead.

This decision enables banks to release nearly 700 billion yuans which is over 100 billion US dollars. Thus, the central bank’s actions will not only support the economy and lead to yuan’s depreciation but also they will avert corporate defaults and a crash on the stock exchange.