China injects record $112bn cash to revive economic growth
The People's Bank of China (PBOC) has pumped a staggering 1.45 trillion yuan (Rs. 120.8 lakh crore) into the economy via its medium-term lending facility. This was done to bolster China's economy facing a housing slump and weak demand. Becky Liu, Managing Director at Standard Chartered, remarked, "MLF injection is much larger than expected, so it suggests continued easy monetary policy." He also added that this implies China won't be cutting the reserve-requirement ratio for banks in the near future.
MLF injection indicates continued easy monetary policy
This financial support highlights Beijing's challenge of selling an extra one trillion yuan in the final quarter of the year to fund stimulus efforts. Rates strategist Frances Cheung at Oversea-Chinese Banking in Singapore explained that "the injections are more than enough to cover additional bond supply - with the remainder potentially being used to support loan extension." Cheung also mentioned that China's government bonds will respond to potential growth recovery, maintaining a mild upward bias to yields and yuan rates.
Manufacturing and services activities shrank in November
China's economy faced challenges this year as the anticipated bounce-back from strict 'Covid Zero' measures fell short, compounded by a worsening property crisis. Recent data revealed contractions in both manufacturing and services activities in November, strengthening the notion that additional government intervention is necessary to bolster a stumbling recovery. November's official Purchasing Managers' Index (PMI) dropped to 49.4 from October's 49.5, as per National Bureau of Statistics data, falling short of economists' expected 49.7.
Industrial production and retail sales data on radar
The rate on the one-year loans was kept unchanged at 2.5%. Economists will be keeping a close eye on industrial production and retail sales data due this Friday. These figures will provide insight into the pace of economic recovery and whether further government support is necessary or not.
