China Boosts Liquidity Support for Banking System

The People's Bank of China (PBOC) has increased liquidity support to the banking system by rolling over medium-term policy loans, injecting 289 billion yuan ($39.6 billion) of fresh liquidity, the largest net injection in nearly three years. The PBOC kept the interest rate on one-year policy loans unchanged at 2.50% amid concerns about the risk of further yuan declines. The central bank aims to balance providing ample liquidity to aid the struggling economy while stabilizing the yuan amidst expectations of higher US rates. Chinese local governments are rushing to issue special refinancing bonds to repay outstanding liabilities, and tax collections in October are expected to cause liquidity stress. Analysts anticipate further monetary easing measures from the PBOC in the near-term.