PBOC set to bolster small businesses, injects CNY40 billion via Reverse Repos

The People’s Bank of China (PBOC) is likely to extend more funding measures from the baking sector to the real economy and small businesses in the months ahead, China Daily reports, citing people with knowledge of the matter.

Key takeaways

“The latest policy signal from the central bank might indicate a targeted easing of credit, while the overall monetary policy, being prudent and stable, is unlikely to shift to a massive stimulus.”

“The messages from the meeting may hint at a rise of growth pressure in the second half of this year, indicating that policy fine-tuning is possible.”

“They predicted that the PBOC will keep liquidity at a stable and ample level, while the issuance of bank loans may accelerate in the remainder of the year. Some foresee one more cut of banks' reserve requirement ratio, or the amount of cash they must deposit in the central bank, as one of the options by the end of the year.”

Meanwhile, the Chinese central bank injected CNY50 billion via seven-day Reverse Repos while Reverse Repos with CNY10 billion mature this Wednesday, making a net CNY40 billion net liquidity boost via Open Market Operations (OMO).

Market reaction

The Chinese yuan is on the bids so far this Wednesday, dragging USD/CNY 0.09% lower to 6.4762, as of writing.