China’s cash squeeze has abated after the central bank reassured investors that it wants to avoid deeper turmoil by making its first market-wide money injection in three weeks.
The People’s Bank of China pumped Rmb29bn ($4.8bn) into the financial system via open-market operations on Tuesday morning. Although the injection was tiny relative to the country’s Rmb100tn banking market, it was an important gesture to coax wary lenders back into doing business with each other.
The relief was virtually immediate. The seven-day bond repurchase rate, a key gauge of short-term funding, fell 344 basis points to 5.4 per cent, the steepest decline in more than two years, as liquidity improved.
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