People’s Bank of China executes large liquidity injections

The People’s Bank of China (PBOC) is implementing several liquidity operations to stabilize the banking system. On August 14, the central bank plans to execute a six-month outright reverse repurchase operation, rolling over CNY 1 trillion (approximately USD 147.4 billion) of maturing funds on a one-to-one basis. This move aims to ensure sufficient liquidity and prevent significant drains from expiring instruments from destabilizing market funding conditions.

In a separate mid-month action, the PBOC recently injected a net 348 billion yuan (approximately USD 51.7 billion) into the banking system through overnight reverse repos. This marks the first mid-month use of such overnight operations in the institution's history. The central bank has scheduled three additional injection days, with each day carrying a ceiling of 600 billion yuan (nearly USD 88 billion).

These measures serve as a liquidity corridor to manage market plumbing, as the PBOC has maintained its one-year benchmark lending rate at 3% since May 2025. The strategy focuses on balancing peaks and troughs in liquidity to counteract government bond financing and maturing medium-term lending facility funds.