China's central bank drained 90 billion yuan (about 13 billion U.S. dollars) from the financial system on Tuesday to ensure stable liquidity.
The People's Bank of China (PBOC) pumped 60 billion yuan into the market through reverse repos, with 150 billion yuan of contracts maturing, leading to a net withdrawal of 90 billion yuan. The PBOC said the move was to maintain liquidity "at a reasonable and abundant level" as the liquidity level in the banking system can offset the impact of maturing securities. A reverse repo is a process by which the central bank bids and buys securities from commercial banks with an agreement to sell them back in the future. The PBOC will make policies more forward-looking, flexible and effective, maintain proper control over the floodgate of money supply and keep liquidity at a reasonable and abundant level, according to a quarterly report released earlier this month. China's prudent monetary policy will be "kept neutral and be neither too tight nor too loose," said the report.
