China’s central bank has continued to pump cash into the banking system via reverse repos on Tuesday to maintain liquidity.
With no reverse repos maturing Tuesday, the People’s Bank of China injected a total of 30 billion yuan (about 4.29 billion U.S. dollars) into the market through seven-day reverse repos at an interest rate of 2.2 per cent, according to a statement on the website of the central bank.
The injection is intended to maintain reasonable and sufficient liquidity in the banking system, the central bank.
The central bank pumped 50 billion yuan into the banking system via reverse repos on Monday after skipping open market operations via reverse repos for 10 consecutive trading days.
A reverse repo is a process in which the central bank purchases securities from commercial banks through bidding, with an agreement to sell them back in the future.
China would pursue a prudent monetary policy in a more flexible and appropriate way, according to this year’s government work report.
The country would use a variety of tools including required reserve ratio reductions, interest rate cuts and re-lending to enable M2 money supply and aggregate financing to grow at notably higher rates than last year, said the report.