China's central bank on Friday skipped the open market operations of reverse repos, draining liquidity from the market.
This was the sixth consecutive business day that the People's Bank of China (PBOC) has halted the open market operations of reverse repos, a process where it purchases securities from banks with an agreement to sell them back in the future.
This meant that there was no injection of short-term funds into the banking system, which led to a net cash withdrawal, as previous reverse repos matured Friday and siphoned 30 billion yuan (4.3 billion U.S. dollars) from the market.
The PBOC said in a statement that liquidity in the banking system was "at a relatively high level" as the government sped up fiscal spending near the end of the month.
Fiscal expenditures mean fiscal deposits flow into commercial banks from the central bank, thus, improving market liquidity.
China has pledged to pursue a prudent and neutral monetary policy in 2017, with the M2, a broad measure of the money supply, to grow by around 12 percent, one percentage point lower than the 2016 target.
