China unleashes more money to ease holiday cash squeeze

Floods banking system with US$4.3 billion in funds.

The People's Bank of China, the central bank, yesterday injected liquidity into markets to meet rising cash demand during the Oct. 1 to 7 National Day holiday.

PBOC added the funds into the banking system through six-day reverse repurchase agreements or reverse repos, a process where central banks purchase securities from banks with an agreement to resell them at future dates. The six-day reverse repo was priced to yield 3.9%.

It was the largest single-day liquidity injection since Feb. 7, when PBOC flooded the interbank market with US$67 billion in its open market operations before the Lunar New Year holiday.

Analysts said PBOC’s move is aimed to ease concerns about a quarter-end cash crunch like the one that rocked the country's financial markets in late June.

China's financial markets and business operations will be closed from Oct. 1 to 7 for the National Day holiday. A surge in cash demand is expected because of travel expenses and holiday shopping.

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