Shanghai, November 15 – China’s central bank partially rolled over maturing medium-term loans and kept the interest rate unchanged for the third consecutive month, suggesting that policymakers remain cautious, trying to prevent it from spreading. monetary conditions.
The wave of interest rate hikes around the world has limited Beijing’s ability to sustain a faltering economy, and the yuan’s decline raises the risk of large-scale capital outflows as investors seek higher rates of return elsewhere, especially those offered by US bonds.
Data released earlier in the day highlighted mounting pressure on the world’s second-largest economy, as a new wave of coronavirus outbreaks COVID caused a further loss of momentum.
The People’s Bank of China (PBO extension) claimed to have maintained the interest rate on the loans of the medium-term loan (MLF extension) worth 850 billion yuan (US $120.21 billion) annually to some financial institutions at 2.75%, unchanged from the previous deal.
“The stabilization of the foreign exchange market continues to be high on the macroeconomic policy agenda,” said Wang Qing, chief macroeconomic analyst at Dongfang Jincheng.
“Keeping political interest rates stable will help curb the widening of Sino-US interest rate differentials and stabilize foreign exchange market expectations.”
In a survey of 31 market watchers this week, all traders expected the PBO extension to keep the interest rate unchanged, while 22 of them expected the central bank to fully roll over maturing loans.
Since loans from MLF extension 1 trillion yuan due the same day, the transaction resulted in a medium-term net cash withdrawal of 150 billion yuan through the facility.
The central bank said the latest operation aims to counter the increase in demand for cash due to the payment of taxes and to keep “the liquidity of the banking system reasonably ample”.
Separately, the central bank also injected 172 billion yuan via seven-day repurchase agreements, keeping borrowing costs unchanged at 2.00%, versus 2 billion yuan of such loans maturing on the same day.
The Chinese economy has been shaken in recent weeks by a new wave of infections COVID-19 throughout the country, which disturbed business activity and household consumption. On Tuesday, a slew of data on industrial production, retail sales and property investment indicated a further loss of momentum and a worsening outlook.
The authorities are walking a tightrope in terms of economic policy. The decision by the People’s Bank of China to lower interest rates in August to reactivate credit demand and support an economy affected by the crisis COVID accelerated the decline of the yuan. [CNY/]
The yuan has tumbled about 10% against the dollar so far this year and looks set to post its worst annual result since 1994, when China unified market and policy rates. By midday, the yuan was trading at 7.0508 against the dollar, slightly higher from Monday.
