Chinese Central bank injects $173 billion into economy amidst Coronavirus outbreak

Daniel Fowler
February 5, 2020

The People's Bank of China (PBOC) said in a statement it would launch a 1.2 trillion-yuan reverse repurchase operation on Monday to maintain "reasonable and abundant liquidity" in the banking system, as well as a stable currency market, during the epidemic.

A reverse repo is a process in which the central bank purchases securities from commercial banks through bidding, with an agreement to sell them back in the future.

An official calculation was done by the Reuters media platform, based on the data that China's central bank had given.

Financial markets in China will resume trading on Monday following the end of the extended Lunar New Year holiday that started on January 24.

In a separate statement on Saturday, the PBOC said that although markets would reopen, financial institutions should follow local quarantine rules and try to minimize meetings to reduce the risk of spreading the virus, which has infected more than 14,000 people and more than 300 has killed.

China's central bank will inject the Chinese economy with $174 billion on Monday amid growth fears from the impact of the coronavirus outbreak.

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The injection is one of 30 measures announced by Chinese authorities over the weekend to buttress the economy against disruption from the outbreak, which originated from the central Chinese city of Wuhan.

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On Monday also, the Shanghai Futures Exchange (ShFE) said will suspend its night-time trading sessions until further notice, citing the need to prevent and control a virus outbreak in China. The bank did not give further details on the agreements or the interest rates charged on the transactions. Hubei residents working outside the province were instructed to remain at home.

Economists at Citigroup said the steps taken by Chinese authorities were "unlikely to be sufficient to curtail a sharp downturn in Q1".

With the coronavirus expected to affect the Chinese economy, market analysts at Nomura say they can "expect more detailed measures in the coming days".

"There will be a lowering of forecasts for at least the first part of 2020, in part due to China, in part due to the supply chains".

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