The People's Bank of China injected 400 billion yuan (US$60 billion) into the market through one-year MLF with an interest rate of 2.75 percent.
Photo from CFP
By WANG Yu, XIN Yuan
China's central bank on Monday added liquidity to the banking system through medium-term lending facilities (MLF) and reverse repos for the second time this year with rates 0.1 percent lower than previously.
The People's Bank of China injected 400 billion yuan (US$60 billion) into the market through one-year MLF with an interest rate of 2.75 percent. Meanwhile, the central bank also conducted 7-day reverse repos at 2 percent - a move that many analysts called “unexpected.” Last week, the central bank warned of “structural inflation.”
According to the National Bureau of Statistics, fixed-asset investment in the first seven months of this year reached 32 trillion yuan, up 5.7 percent year on year but still not up to the market’s expectation.
Financing institutions issued 679 billion yuan of loans in July, a new low since 2017. Lowering MLF will boost the economy and push GDP back up, said WANG Qing, chief analyst of Golden Credit Rating International.
“As Covid outbreaks since August further dampen the economy,” Wang said, “the MLF is a good way to stimulate demand.”
As the rate of MLF is down, the loan prime rate (LPR) in August is also set to go down. “The real estate market is still quite bleak,” Wang said. “LPR may go down more than 0.1 percent.”