Key facts
- PBOC resumed daily liquidity operations on Friday.
- PBOC injected 215 billion yuan via seven-day reverse repurchase agreements.
- PBOC withdrew a net 682.7 billion yuan for the week.
- This marks the largest weekly cash withdrawal from the banking system in three months.
- The PBOC previously paused reverse repo operations on Wednesday and Thursday.
China's central bank, the People's Bank of China (PBOC), resumed its daily liquidity operations on Friday, injecting 215 billion yuan into the banking system through seven-day reverse repurchase agreements. This followed a deliberate two-day pause on Wednesday and Thursday. Despite the resumption of daily operations, the PBOC engineered a net withdrawal of 682.7 billion yuan from the banking system for the week ending June 6, which is the largest weekly cash pull in three months. This strategy is intended to encourage banks to deploy excess cash sitting within the interbank system into the broader economy, supporting lending to businesses and households. The PBOC's concern is that a significant amount of cash remains within the financial system as interbank liquidity, rather than reaching the real economy as broad money. By reducing reverse repo operations, the PBOC allowed previous loans to mature without rolling them over, thereby shrinking the comfortable buffer for banks and nudging them to seek returns through lending to businesses and families. The effectiveness of this policy will be monitored through future credit growth and loan data.