This step aims to maintain acceptable and abundant cash liquidity in the banking system.
According to the Xinhua News Agency, reverse repurchases, known as reverse repo, are operations in which the central bank buys securities from commercial banks through bidding, with the agreement to sell them to them again in the future.
The exchange rate of the Chinese yuan against the dollar also stabilized in today’s trading, with the average price reaching 7.1795 yuan per dollar, which is the same level as yesterday.
Chinese rules allow the yuan to rise or fall by 2 percent above the central bank’s guidance rate each trading day in the spot foreign exchange market.
The Central Bank of China announced in a statement last Monday that it had conducted medium-term lending facilities worth 789 billion yuan ($107.96 billion), to maintain sufficient liquidity levels in the banking system.
With 500 billion yuan worth of medium-term lending facility loans due, the People’s Bank of China injected 289 billion yuan of new liquidity into the banking system, the largest net injection of its kind in nearly three years.
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