2023.10.1609:14:00UTC+00China Central Bank Raises Liquidity Support

The People's Bank of China on Monday ramped up its liquidity supply to the banking system via its medium-term lending facility and reverse repos in order to ease the stress in the market.

The Chinese central bank added CNY 789 billion through one-year MLF. However, the rate on the MLF was kept unchanged at 2.5 percent.

As the MLF acts as a guide to loan prime rates, no change is expected in the LPR rate this month. Earlier, the PBoC had reduced the MLF rate in June and August.

The bank also injected CNY 106 billion on Monday via seven-day reverse repos at an interest rate of 1.8 percent.

The PBoC said it intends to keep reasonable and ample liquidity in the banking system.

The central bank increased liquidity support well ahead of debt sales by local governments.

Beijing aims to achieve economic growth of around 5 percent this year, which seems unlikely to realize without additional stimulus. Last week, the International Monetary Fund downgraded China growth outlook citing the lower investment in the country amid the property sector crisis. The economy is projected to expand 5.0 percent this year and 4.2 percent next year.

The National Bureau of Statistics is set to release third quarter GDP data on October 18. Economic growth is forecast to soften to 4.4 percent on a yearly basis from 6.3 percent in the second quarter.