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Govt · Money Mkt
PBoC’s RMB 463 bln MLF injection, the highest since March 2017
2018/06/06 07:48:17
China’s central bank, PBoC, Medium-term Lending Facility, MLF

Jun 06, 2018 (China Knowledge) - China’s central bank has injected RMB 463 billion (USD 72.4 billion) to commercial lenders on Wednesday via its 1-year Medium-term Lending Facility (MLF). The fund injection coincides with the RMB 259.5 billion worth of such contracts maturing on the same day. This sees PBoC pumping a net RMB 203.5 billion via such monetary policy tools so far this month, which is the highest since March 2017.

The move comes against the backdrop of tightening credit conditions and tougher liquidity conditions amid the central government’s deleveraging drive to curb excess borrowing. China’s central bank utilizes MLF as one of its policy tools to supply liquidity to financial system, increase support to the smaller firms and the green economy, and ensure healthy development of the credit bond market, the PBoC said in a statement. It also provides liquidity to financial institutions, with maturities ranging from three months to a year but at a higher cost than open market operations.

Last week, China‘s central bank announced the broadening of the range of collateral it accepts in its medium-term loan facility to boost liquidity of small business, green economy and other areas. PBoC said that it will accept collaterals including AA-and-above rated bonds backed by credit to the green economy, agriculture and small companies, corporate bonds with AA+ and AA ratings and quality loans to small and green businesses.

It is widely anticipated the central bank will cut the required reserve ratio (RRR) for a third time this year to inject cash in the banking system by reducing the amount of money that banks have to set aside. RRR cuts provide cheaper source of liquidity than MLF lending.

China’s central bank has said its prudent and neutral monetary policy will continue as they continue to clamp down on high corporate debt levels and risky lending practices that elevate financial risks.

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