China's central bank injects liquidity into market in January

BEIJING - China's central bank injected 495.5 billion yuan ($78.8 billion) into the market via various tools in January to maintain liquidity.

The People's Bank of China (PBOC), the central bank, said 398 billion yuan was added via the medium-term lending facility (MLF) to keep interbank liquidity stable. The funds will mature in one year at an interest rate of 3.25 percent.

The injection brought total outstanding MLF loans to 4.63 trillion yuan at the end of January.

The MLF tool was introduced in 2014 to help commercial and policy banks maintain liquidity by allowing them to borrow from the central bank using securities as collateral.

The central bank increasingly relies on open-market operations, rather than changes in interest rates or reserve requirement ratios, to manage liquidity in a more flexible and targeted manner.

In January, the PBOC also injected 72 billion yuan of funds through pledged supplementary lending (PSL) to China Development Bank, Agricultural Development Bank of China, and The Export-Import Bank of China.

Last month, the central bank also granted 25.45 billion yuan to financial institutions through the standing lending facility (SLF) tool to meet provisional liquidity demand.

The PBOC open market operations are closely watched by the market, as they have become major tools for the central bank in pursuing its monetary policy.

China has decided to maintain a prudent and neutral monetary policy in 2018 as it strives to balance growth and risk prevention.