On April 27, the People’s Bank of China (PBOC) launched a 400 billion yuan Medium-term Lending Facility (MLF) operation through fixed-quantity, interest rate bidding, and multi-price winning methods, with a term of 1 year. Against the backdrop of 600 billion yuan of MLF maturing this month, the PBOC’s operation resulted in a net withdrawal of 200 billion yuan, ending the previous 13 consecutive months of increased rollover. In addition, the central bank also carried out 1.3 trillion yuan of outright repos this month, achieving a net withdrawal of 400 billion yuan after offsetting the maturing 1.7 trillion yuan of outright repos. This means that the net withdrawal of medium-term liquidity in April reached 600 billion yuan.
Analysts pointed out that the PBOC’s move is a manifestation of prudent monetary policy, which is intended to maintain reasonable and sufficient liquidity in the market while guiding market interest rates to run smoothly. It is not a signal of tightening, but more about adjusting the liquidity structure to adapt to the current economic operation rhythm. Meanwhile, the central bank’s operation also reflects its emphasis on balancing economic stability and risk prevention, providing a solid monetary foundation for the high-quality development of the real economy and the smooth operation of the financial market.
In the first quarter of this year, the Export-Import Bank of China issued more than 300 billion yuan in loans to the foreign trade sector, of which 40% was invested in stabilizing foreign trade entities and industrial chains, and 35% was directed to direct import and export trade links, which, together with the central bank’s liquidity regulation, has effectively supported the steady development of foreign trade and the real economy. As the core of China’s monetary policy operation, the MLF adjustment has always attracted much attention from the market. This net withdrawal operation is expected to have a moderate impact on market liquidity, and the market will continue to pay attention to the central bank’s follow-up policy trends and liquidity adjustment measures.
