China central bank suspends reverse repos to drain liquidity

Xinhua | Updated: 2017-05-02 14:06

BEIJING - China's central bank suspended open market operations Tuesday, in a sign of policy tightening.

The People's Bank of China (PBOC) withdrew 70 billion yuan ($10 billion) from the market Tuesday, as reverse repurchase agreements (repos) matured.

Reverse repos is a process by which central banks purchase securities from banks with an agreement to sell them back in the future.

"There was an increase of fiscal spending at the end of last month and liquidity in the banking system remains at a moderate level. The central bank will not conduct reverse repos Tuesday," according to a statement on the PBOC's website.

The central bank has conducted open market operation reverse repos for nine-consecutive days.

Analysts said such moves reinforced the view that liquidity in the banking system will remain tight in May, as the economy stabilizes in an uncertain environment.

China's GDP expanded 6.9 percent year on year in the first quarter, up from the 6.8-percent growth of the previous quarter and 6.7 percent in 2016.

China has set the tune of its monetary policy in 2017 as prudent and neutral, keeping an appropriate liquidity level but also avoiding excessive liquidity injections.

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