China pumped the most liquidity into its financial system via short-term policy loans on record, a sign policymakers are likely to keep interest rates low to bolster a nascent economic recovery.
The People’s Bank of China granted lenders a net 733 billion yuan ($100 billion) of cash with so-called reverse repurchase contracts on Friday. Only a few days after the central bank made the largest injection of one-year policy loans on Monday.
The injection of extra cash into the economy give a much-needed boost to China’s growth, which has been challenged by a lack of demand and a downturn in the property market this year. It will also provide lenders with sufficient funding, as Beijing and local governments are set to sell more bonds to finance stimulus spending and as the tax payment season approaches.
Thus, this wealth effect will trickle down into risk assets (especially crypto) as interest rates continue to decline, alongside this.
As it can also be deduced that Beijing likes to frontload Liquidity in the early months of the year.