The People’s Bank of China (PBOC) conducted a reverse repo operation through which it injected 101 thousand million yuan (about 12.838 million euros) into banking entities. The main objective of this measure is to maintain reasonable and ample liquidity in the financial system.The institution stated in a statement.
A reverse repurchase is a strategy used by the Chinese central bank whereby it purchases securities from its commercial financial institutions with the agreement to sell them again in the future. in this occasion, The People’s Bank of China implemented this operation in order to inject liquidity into the financial system and ensure the availability of sufficient funds. For banking entities.
In addition to the cash injection, the People’s Bank of China announced that pReducing the mandatory reserve ratio by two points, from the current 6% to 4%. Foreign exchange for financial institutions. The measure will take effect from September 15 and aims to improve the ability of Chinese financial institutions to use foreign exchange funds.
Yuan stability
The People’s Bank of China’s implementation of these measures also seeks to provide stability to the yuan, whose exchange rates have reached 15-year lows. By reducing the rate of mandatory foreign currency reserves, the aim is to enhance the ability of Chinese financial institutions to manage fluctuations in exchange rates and ensure monetary stability in the country.
In short, the People’s Bank of China injected 101 billion yuan into the financial system through a reverse repo operation. In addition, it announced a reduction in the mandatory foreign exchange reserve rate for financial institutions. These measures are aimed at maintaining reasonable and abundant liquidity in the financial system, improving the usability of foreign currency funds, and providing stability to the yuan in the context of low exchange rates.
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