PBOC puts less capital into system

CHINA'S central bank injected less capital into the banking system through open market operations as liquidity strain eased this week.

The People's Bank of China injected 422 billion yuan (US$67.6 billion) this week via reverse-repurchase contracts to counter a weekly withdrawal of 523 billion yuan due to maturing reverse-repurchase contracts and central bank bills, data showed.

That caused a net 101 billion-yuan drainage from the banking system, the largest amount in three weeks. Last week the central bank injected a record 568 billion yuan into the system.

As of yesterday, the weekly drain of money did not impact market liquidity severely as the seven-day repurchase rate, an indicator of borrowing costs among banks and usually watched as a sign of liquidity stress, was steady at 3.2792, down from a five-week-high of 4.1958 last Monday.

Wei Wenjie, an investment manager with Industrial Securities, said market liquidity will be relatively abundant for the remainder of the year as an appreciation of the yuan is expected to trigger an inflow of foreign capital.

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