Evergrande crisis: China injects liquidity, adds $18.6 bn to banking system

China’s central bank boosted its gross injection of short-term cash into the financial system after concern over a debt crisis at China Evergrande Group roiled global markets. 

The People’s Bank of China pumped 120 billion yuan ($18.6 billion) into the banking system through reverse repurchase agreements, resulting in a net injection of 90 billion yuan. That matches the amount seen on Friday, and was just below that of Saturday. Sentiment was also boosted after Evergrande’s onshore property unit said it plans to repay interest due Thursday on its local bonds. 

“The PBOC’s net injection is probably aimed at soothing nerves as the market worries about Evergrande,” said Eugene Leow, a senior rates strategist at DBS Bank in Singapore. “While the aim may be to instill discipline, there is also a need to prevent contagion into the real economy or to other sectors.” The need to calm market jitters is pressing amid losses in China-related equities worldwide over recent days amid concern over Evergrande’s debt woes. 

The benchmark CSI 300 Index fell as much as 1.9 per cent Wednesday after the Hang Seng China Enterprises Index — a gauge of Chinese shares traded in Hong Kong — slid the most in two months on Monday. 

Losses came even as Wall Street analysts sought to reassure investors that Evergra­nde won’t lead to a Lehman moment. China’s cash operations have been aimed at striking a balance between spurring growth hurt by fresh virus outbreaks and tighter regulations, while preventing asset bubbles.