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5 years ago

China's C bank injects $83b to avoid a cash crunch

Headquarters of the People's Bank of China (PBOC), the central bank, in Beijing   	— Reuters
Headquarters of the People's Bank of China (PBOC), the central bank, in Beijing — Reuters

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China's central bank injected a record $83 billion into the country's financial system on Wednesday, seeking to avoid a cash crunch that would put further pressure on the weakening economy, reports Reuters.

China's policymakers are pledging to step up stimulus measures this year and do more to protect jobs as economic growth cools to 28-year lows.

But a raft of measures last year from big rail projects to tax cuts seem to have had little impact so far, with recent data suggesting activity is cooling more quickly than expected.

"The news is clear - the economy needs help," said Trinh Nguyen, senior economist for emerging Asia at Natixis in Hong Kong.

Wednesday's open-market operation, the bank's largest net single-day injection on record, came a day after China's state planner, central bank and finance ministry all offered reassurances to investors, signaling more spending and other types of policy support.

But shockingly weak December trade data released earlier this week, along with shrinking factory activity, are stirring speculation over whether more rapid and aggressive policy measures are needed to turn the world's second-largest economy around.

Authorities now agree the economy needs more decisive support "and today's large injection reflects that," Nguyen added.

The People's Bank of China (PBOC) said Wednesday's injection was aimed at ensuring there are ample funds in the financial system, which is facing strains as tax payments peak in mid-January, and as demand for cash picks up ahead of the Lunar New Year holidays starting in early February.

"The banking system's overall liquidity is falling rapidly," it said in a statement.

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