(Bloomberg) -- China unexpectedly injected cash into the financial system with a medium-term tool, in an effort to aid an economy expanding at the slowest pace since the early 1990s.
The People’s Bank of China offered 200 billion yuan ($29 billion) of one-year loans to banks Friday, while keeping the interest rate unchanged at 3.25%, according to a statement. That’s despite no facilities coming due Friday. Authorities have refrained from adding cash via open-market operations for 15 straight days, citing ample liquidity.
A previously-announced reduction of the reserve requirement ratio will also come into effect Friday, releasing a further 40 billion yuan into the banking system. Still, that wasn’t enough to offset the liquidity drainage as seasonal tax payments increase the demand for cash, according to the China Securities Journal.
Earlier this month, the PBOC reduced the cost of 1-year funds to banks for the first time since 2016, seeking to calm markets nervous amid a plunge in government bonds and a slowing economy. Data released Thursday showed further weakness in China’s growth, with industrial output and retail sales trailing economists’ forecasts.