China injects cash into banking system as growth slows

[BEIJING] China will inject liquidity into the financial system by offering medium-term loans to banks on Friday, according to traders familiar with the matter.

The People's Bank of China will offer the loans even as no facilities come due, the people said. Authorities have refrained from adding cash via open-market operations for two weeks, citing ample liquidity. The central bank has also refrained from using a targeted monetary tool.

A previously-announced reduction of reserve requirement ratio will come into effect Friday, releasing further cash into the banking system. Still, that wasn't enough to offset the cash drainage as seasonal tax payments increase the demand for cash, according to the China Securities Journal.

Concerns about a lack of policy easing and elevated inflation as well as investors sporting stronger risk appetites have prompted traders to sell Chinese bonds of late, with the benchmark 10-year sovereign yield climbing to the highest level since May this month.

BLOOMBERG