BEIJING: China’s central bank on Wednesday skipped the open market operations of reverse repos. This was the eighth consecutive business day that the People’s Bank of China (PBOC) has halted the open market operations of reverse repos, a process where it purchases securities from banks with an agreement to sell them back in the future. The PBOC said in a statement that liquidity in the banking system was “at a relatively high level.”
The government sped up fiscal spending near the end of last month. Fiscal expenditures mean fiscal deposits flow into commercial banks from the central bank, thus, improving market liquidity. In the interbank market, the overnight Shanghai Interbank Offered Rate, which measures the cost that Chinese banks lend to one another, dipped 1.02 basis points to 2.4868 percent on Wednesday, with the rate for one-week loans falling 3.80 basis points to 2.7400 percent. China has pledged to pursue a prudent and neutral monetary policy in 2017, with the M2, a broad measure of the money supply, to grow by around 12 percent, one percentage point lower than the 2016 target.
