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China’s PBOC Braces for New Year Cash Demand With Loan Rollover

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The People’s Bank of China rolled over a
269.5 billion yuan ($43.4 billion) lending facility to banks and
added 50 billion yuan in loans as it seeks to ease liquidity
ahead of the Chinese New Year holiday.

The facility, first issued in October with an interest rate
of 3.5 percent, was rolled over to keep the money market stable,
the central bank said in a statement on its official microblog
account. It said the move also aims to smooth liquidity before
the holiday, which begins Feb. 18.

The PBOC has sought to shore up liquidity and broaden
stimulus efforts in recent months, cutting the benchmark lending
rate in November and issuing billions of yuan in short- and
medium-term loans to banks. Each year around this time, demand
for yuan starts to spike as Chinese give each other red
envelopes full of cash for the Lunar New Year holiday.

“There may be some irregular capital inflow and outflow
around the world,” PBOC Governor Zhou Xiaochuan said at a World
Economic Forum
panel in Davos, Switzerland minutes after the
central bank announcement. “That may also be a source of
volatility.”

The PBOC doesn’t intend to provide too much liquidity, Zhou
said in Davos.

China’s money-market rate climbed the most in a month today
amid speculation banks will start hoarding funds to meet demands
for cash. The central bank hasn’t conducted open-market
operations since November. Last month, the PBOC reportedly
rolled over part of a separate 500 billion yuan lending
facility.

To contact Bloomberg News staff for this story:
Xin Zhou in Beijing at
xzhou68@bloomberg.net

To contact the editors responsible for this story:
Malcolm Scott at
mscott23@bloomberg.net
Nicholas Wadhams

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China’s PBOC Braces for New Year Cash Demand With Loan Rollover

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