The People’s Bank of China is providing funds to joint-stock banks to help them prepare for year-end liquidity needs, a government official familiar with the matter said yesterday, asking not to be identified because there hasn’t been an official announcement. Joint-stock banks are mid-sized national banks with mixed ownership.The injection comes after the central bank provided 500 billion yuan of liquidity to China’s five biggest banks last month, a government official familiar with the matter said at the time. Premier Li has refrained from using broad-based stimulus and expressed a preference for reform to boost an economy weighed by a property slump.
“The economy is decelerating, and I believe it is high time to do more easing to stop the downward trend,” Shen Jian-guang, Hong Kong-based chief Asia economist at Mizuho Securities Asia Ltd., said in an e-mail.
The central bank has informed 20 banks, mainly joint-stock lenders including including China Guangfa Bank Co. and Industrial Bank Co. (601166) to submit applications for funds in the form of three-month loans from the central bank, the Wall Street Journal reported yesterday, citing unidentified banking executives briefed on the matter.
Three calls to the PBOC’s press office went unanswered after regular business hours yesterday.
Prudent Policy
Central bank Governor Zhou Xiaochuan said this month that the PBOC will stick to prudent monetary policy to ensure reasonable growth in money and credit. China will conduct liquidity operations as needed and push forward with market-based interest-rate reforms, he said.
A major purpose of the injections “is to boost confidence in the financial markets, especially the A-shares listed in Shanghai,” Ting Lu, Bank of America Corp.’s head of Greater China, said in a note to clients yesterday. In order to ensure a smooth start to a much-anticipated trading link between Hong Kong and Shanghai, authorities “will have to deliver a stable A-share market,” he wrote.
Subdued inflation figures released this week give the bank more room to further ease monetary policy. The PBOC cut the interest rate it pays lenders for 14-day repurchase agreements for the second time in a month this week.
Slowed by a cooling real estate market, the economy probably expanded 7.2 percent in the third quarter, the least in more than five years, based on the median estimate in a Bloomberg survey.
Aggregate financing was 1.05 trillion yuan, the PBOC said on Oct. 16, compared with the 1.15 trillion yuan median estimate in a Bloomberg survey of economists. New local-currency loans were 857.2 billion yuan and M2 money supply grew 12.9 percent from a year earlier. Foreign reserves were $3.89 trillion at Sept. 30.
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