by XIN Yuan
China's central bank said it will conduct RMB 1 trillion (about US$140 billion) in one-year Medium-term Lending Facility (MLF) operations on Nov 25, signaling continued support for system-wide liquidity as government bond issuance ramps up and bank funding pressures rise toward year-end.
The move follows RMB 500 billion of net buyout repo injections earlier this month, keeping November’s mid-term liquidity net supply at RMB 600 billion for a fourth straight month.
Analysts said the People's Bank of China is responding to three pressures: a jump in local government bond supply after authorities allocated RMB 500 billion in new quota in October; stronger demand for medium- and long-term credit linked to policy-backed lending tools; and a sharp increase in maturing negotiable certificates of deposit.
WANG Qing, chief macro analyst at Golden Credit Rating, told Jiemian News that the PBOC is front-loading liquidity to prevent year-end tightening, support government bond issuance and guide banks to expand credit.
He added that recent economic softness has reinforced the case for maintaining an accommodative stance. Analysts expect the PBOC to continue relying on MLF and buyout repos, though the scale of injections may ease as authorities could deliver another reserve-requirement-ratio cut around year-end depending on growth, inflation and real-estate stabilization needs.
