In response to the escalating year-end liquidity demand, China’s central bank, The People’s Bank of China (PBOC), recently reinstated the use of 14-day reverse repos. This strategic move, the first in three months, injected a total of 244 billion yuan ($34.28 billion) into the market through open market operations. Of this, 184 billion yuan utilized seven-day tenors, with the remaining 60 billion yuan allocated to 14-day tenors—a method not employed since late September.
The decision to reintroduce the 14-day reverse repos follows a significant injection of 1.45 trillion yuan (USD 204 billion) into the banking system through one-year loans, marking the most substantial move of this nature since 2016.
This proactive measure aims to support the Chinese economy, addressing challenges such as a real estate sector downturn and subdued demand. It underscores China’s commitment to maintaining an accommodative monetary policy.
Concurrently, the PBOC has introduced new measures to enhance oversight of non-banking payment companies. These measures include stricter licensing rules, risk management requirements, and improved information protection capabilities. Violations may result in fines, restrictions, or license revocation.
This regulatory initiative aligns with global trends, mirroring actions taken by regulators in the US and India to monitor and mitigate risks associated with non-bank entities.
As the year concludes, these developments indicate a comprehensive strategy by China to navigate economic challenges effectively. The central bank’s measured responses, both in monetary policy and regulatory oversight, reflect a commitment to fostering economic resilience and stability, both domestically and on the global stage.
By: Montel Kamau
Serrari Financial Analyst
18th December, 2023
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