The People's Bank of China moved to fix a severe liquidity crunch that threatened to cause widespread cash difficulties during the ensuing Chinese New Year by pumping in nearly 255bn yuan into its interbank market using reverse repo mechanisms.
It also opened a window to its Standing Lending Facility for the benefit of small and medium-sized banks located across 10 regions to help ease their liquidity problems.
People's Bank of China’s liquidity support
The People's Bank of China’s actions helped douse a massive rise in the seven-day repurchase rate – which fell over 100 basis points after the cash injection. On January 20, this rate had spiraled higher by 153 basis points, signalling aggravated liquidity problems and pushing the Shanghai Composite Index below...
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