China’s central bank is injecting 500 billion yuan (US$81.4 billion) into the nation’s five largest banks in a bid to bolster economic growth.
The People’s Bank of China will funnel 100 billion yuan each to Industrial & Commercial Bank of China Ltd., Agricultural Bank of China Ltd., China Construction Bank Corp., Bank of China Ltd. and Bank of Communications Co., according to media reports.
By using its standing lending facility (SLF), the PBoC aims to provide liquidity to the financial system without sending the wrong message that it is implementing an across-the-board monetary loosening. The move heeds a call by Premier Li Keqiang for targeted economic restructuring, the reports said.
The amount will have the same effect as a 50 basis point cut to the reserve ratio for the whole banking system, according to market analysts.
The move has been confirmed by several financial institutions including Guotai Junan Securities and Guosen Securities. However, the PBOC has yet to give an official confirmation.
“The move is aimed at providing liquidity to pre-empt potential liquidity shortages given the lackluster economic growth,” said Qiu Guanhua, chief banking analyst at Guotai Junan.
Market liquidity is likely to be tight due to the coming National Day holiday, initial public offerings of stocks and the increased demand for funds at the end of the quarter, said Zhong Zhengsheng, chief macro analyst at Guosen Securities.
The injection will be in the form of a three-month, low-interest-rate loan to the banks, the Wall Street Journal quoted a bank executive who was briefed on the decision as saying.
“While there are no explicit conditions attached to this targeted lending, the PBOC is expected to guide the big banks to channel credit into areas the government has deemed as important to the economy, such as public housing and private and small businesses,” the executive said.
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