The Chinese government continues to offer measures to spur economic growth in an attempt to bolster confidence in the economy. China today pumped a record amount of cash into the financial system to boost liquidity while also expanding support measures to aid its troubled property sector. However, the market reaction to the support measures was muted as the Shanghai Composite gave up an early advance and closed down -0.56%.
The Peoples Bank of China (PBOC) today boosted liquidity in the banking system by offering commercial lenders a net 800 billion yuan ($112 billion) of one-year loans through its medium-term lending facility. That was twice the amount analysts had expected and a record amount of cash, giving banks more money to buy government bonds issued to support infrastructure spending. Chinese authorities face the challenge of balancing monetary and fiscal stimulus to add enough liquidity to support government bond sales without triggering a slump in the yuan.
