Economics
China’s Central Bank Faces a Tough Task in Guarding Nervous Yuan
- Liquidity needs could hit around $143 billion at quarter-end
- Officials seen preferring open-market route to funding supply
Photographer: Qilai Shen/Bloomberg
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September is set to be a hard month for China’s money markets, handing the nation’s central bank the tricky task of adding just enough liquidity without prompting renewed weakness in the yuan.
Funding costs usually spike at this point, as banks hoard cash for quarter-end regulatory checks. Adding to the pressure now is a requirement to buy a flood of local government bond issuance, mandated to shore up infrastructure spending as the economy slows. A large amount of the People’s Bank of China’s existing funding is also maturing, and all told, liquidity needs could hit around 980 billion yuan ($143 billion) according to Bloomberg calculations.