China to Inject 500 Billion Yuan to Maintain Ample Banking-System Liquidity

Dragon Media News Desk

The People’s Bank of China, the country’s central bank, has announced that it will conduct a 500-billion-yuan outright reverse repo operation on Wednesday to maintain ample liquidity in the banking system.

The amount is equivalent to approximately 73.6 billion US dollars.

According to the central bank’s announcement on Tuesday, the operation will be conducted with a fixed quantity through interest-rate bidding. Successful bids will be determined at multiple price levels, and the operation will have a maturity period of three months.

A total of 300 billion yuan in three-month outright reverse repos is scheduled to mature in August. As the new operation amounts to 500 billion yuan, it represents an increased rollover and is expected to provide a net liquidity injection of 200 billion yuan into the banking system.

The People’s Bank of China introduced outright reverse repo operations in October 2024 as a tool for managing liquidity in the national financial system. Such operations, with maturities of no more than one year, are generally conducted once a month.

Through outright reverse repo operations, the central bank purchases eligible securities from financial institutions and injects funds into the banking system for a specified period.

The instrument enables the central bank to provide liquidity over a longer period than some short-term market operations. It is expected to help financial institutions meet funding requirements for lending, payment settlement and daily operations.

China has expanded its monetary policy toolkit by using outright reverse repos alongside existing instruments, including temporary repos, temporary reverse repos, and the purchase and sale of government bonds.

The latest operation reflects China’s policy priority of maintaining sufficient banking-system liquidity, stabilising market expectations and creating a supportive monetary and financial environment for the real economy.