China’s central bank resumes reverse repo operation after 15-day halt

BEIJING (Xinhua) – China’s central bank yesterday resumed reverse repo operations after 15 consecutive trading days of suspension to maintain liquidity.

The People’s Bank of China (PBOC) conducted 60 billion yuan (about USD8.76 billion) of seven-day reverse repos at an interest rate of 2.55 per cent, unchanged from the previous operation.

The move was aimed at offsetting the impact of tax payments and government bond issuances and keeping liquidity in the banking system at a reasonable and ample level, the PBOC said on its website.

A reverse repo is a process by which the central bank bids and buys securities from commercial banks, with an agreement to sell them back in the future.

In yesterday’s interbank market, the overnight Shanghai Interbank Offered Rate (Shibor), which measures the cost at which banks lend to one another, fell 3.3 basis points to 2.557 per cent, a one-week high. However, the Shibor rate for one-month loans rose slightly to 2.751 per cent, the highest level in more than two weeks.

The country vowed to maintain control over the floodgates of monetary supply and keep liquidity at a reasonable and ample level, according to a statement issued after a meeting of the Political Bureau of the Communist Party of China (CPC) Central Committee in July.