China's central bank makes massive liquidity injection

China's central bank is pumping huge flows of cash into the financial system via open market operations to stave off a pre-holiday liquidity squeeze.

The People's Bank of China (PBOC) on Friday offered 100 billion yuan ($15.3 billion) of funds to the market, using reverse repurchase agreements (repo), a process in which central banks purchase securities from banks with agreements to resell them in the future, Xinhua reported.

The move, following Tuesday's 440-billion-yuan reverse repo operations, the largest single-day liquidity injection in three years, and Thursday's injection of 340 billion yuan have resulted in a net 690 billion yuan being pumped into the market this week.

The central bank said on Thursday that it would temporarily increase the frequency of its open market operations to every working day around the Lunar New Year holiday, compared with previously twice a week -- on Tuesday and Thursday.

The massive liquidity injection is intended to satisfy surging cash demand ahead of the week-long Lunar New Year holiday, which starts on February 7.

Following the cash injection, the Shanghai Interbank Offered Rate (Shibor), which measures the cost at which Chinese banks lend to one other, fell slightly to 1.989 percent on Friday.

--Indo-ASian News Service

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