MKsport headquarters of the People's Bank of China in Beijing Photo: IC" src="https://www.globaltimes.cn/Portals/0/attachment/2025/2025-01-19/bec8e468-3749-430d-bbbc-670022996f0a.jpeg" />

The headquarters of the People's Bank of China in Beijing Photo: IC

The People's Bank of China (PBC) conducted 14-day reverse repos at an interest rate of 1.65 percent on Sunday, injecting 151 billion yuan ($20.84 billion) into the market.

This measure is intended to maintain sufficient liquidity in the banking system ahead of the Spring Festival holidays, the PBC said in a statement.

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.

China's central bank conducted 284 billion yuan of 14-day reverse repos at an interest rate of 1.65 percent on Friday. On Friday, the central bank also conducted a 200-billion-yuan medium-term lending facility (MLF) operation to maintain ample liquidity in the country's banking system, Xinhua News Agency reported.

China's central bank also conducted 1.1575 trillion yuan of 14-day reverse repos at an interest rate of 1.65 percent on Wednesday, Xinhua reported.

"The central bank has been actively conducting 14-day reverse repurchase operations ahead of the Spring Festival to inject short-term liquidity into the market. This strategy is primarily aimed at smoothing out the supply and demand for funds, which helps stabilize economic activity during the critical period before and after the holiday," Xi Junyang, a professor at the Shanghai University of Finance and Economics, told the Global Times on Sunday.

As the Spring Festival approaches, many people withdraw cash to give red envelopes and concentrate on spending and consumption. Therefore, the central bank will increase liquidity through substantial fund injections, including reverse repos, to ensure smooth liquidity, he explained.

Wang Peng, an associate research fellow at the Beijing Academy of Social Sciences, told the Global Times on Sunday that this move also provides strong support for the economy after the festival.

Increased liquidity ensures that businesses have enough funds for their operations after the holiday, allowing them to expand production and improve efficiency, which contributes to stable economic growth. Additionally, this influx of liquidity boosts overall market confidence, attracting more investments and stimulating market activity, Wang said.

"Overall, these actions by the central bank provide essential financial support and confidence for the economy after the Spring Festival," Wang added.

Zou Lan, an official with the PBC, said at a press conference on Thursday that in 2024 the central bank implemented various measures to foster a favorable liquidity environment for the financial market. The central bank has used a range of monetary policy tools, including adjusting the reserve requirement ratio, providing relending and rediscounting, and conducting open market operations. Additionally, it introduced a new outright reverse repos to meet the liquidity needs of the banking system.

Last year, the PBC lowered the required reserve ratio (RRR) twice by a total of 1 percentage point and reduced the central bank's policy interest rates twice by a total of 0.3 percentage points, representing the most significant adjustments in recent years. These policy measures have played a crucial role in ensuring the stable operation of the entire financial market, Zou said.

Looking ahead, Xi Junyang anticipated a potential RRR cut by the end of the first quarter or the beginning of the second quarter. This move would provide essential financial support for construction projects and new initiatives.

Zou said that PBC will collaborate with relevant departments to improve the accessibility of financial tools and, when appropriate, expand their availability when needed. Relevant enterprises and institutions will be able to access sufficient medium- to long-term funding as needed to boost their investments.