China's central bank to issue 3-y bank bills; latest sign of liquidity tightening

The People's Bank of China, China's central bank, said Wednesday it will issue 15 billion yuan (2.2 billion U.S. dollars) of 3-year bank bills Thursday, another sign the government wants to tighten liquidity.

The central bank stopped issuing 3-year bills in June 2008 to reverse the economic slowdown.

"The resumption of the issuance of 3-year bills is the latest signal of liquidity tightening," said Liu Yuhui, an economist with the Chinese Academy of Social Sciences.

Experts said the resumption of 3-year bill issuance also relates to the country's recent strong economic data.

China's Purchasing Managers' Index (PMI) for manufacturing sectors, which is designed to provide a real-time snapshot of business conditions, rose to 55.1 percent in March, the 13th straight month the index has been above 50 percent.

A PMI reading above 50 percent suggests economic expansion, while one below 50 percent indicates contraction.

"The resumption in 3-year bill issuance shows the central bank has grown more confident about the economic recovery and is paying more attention to inflation," said He Yifeng, a researcher with the China Institute for Development and Reform at the Central University of Finance and Economics.

Source: Xinhua