The People’s Bank of China said it conducted 110 billion yuan ($16.7 billion) of seven-day reverse-repurchase agreements and 290 billion yuan of 28-day contract, helping ease a cash squeeze as the coming Chinese New Year holiday spurs demand for funds at a time when capital outflows are mounting.
That compares with 160 billion yuan of contracts that matured and resulted in a net cash injection of 315 billion yuan for this week’s two auctions.
Other lending tools were used to add about 700 billion yuan this week for terms ranging from three days to a year.
An estimated $843 billion of capital flowed out of China in the 11 months through November, according to a Bloomberg estimate, and policy makers are having to add funds to the financial system to prevent interest rates rising as money exits.
Standard Chartered Plc says lenders’ reserve-requirement ratios will need to be cut to free up funds, even after this week’s cash injections.