The PBOC puts liquidity into the system to counter the Evergrande crisis
Things in China are not going as well as they did in the US with Lehman. Evergrande is turning out to be a much bigger problem, even in terms of public order. With tens, indeed hundreds, of thousands of investors at risk, the situation becomes chaotic and the company headquarters has been stormed by savers who have entered the headquarters by occupying offices and preventing workers and employees from leaving. from the offices.
From an economic point of view, a Chinese central bank, PBOC, which has so far been very cautious in intervening, has made the largest injection of liquidity since February, in order to stop a possible squeeze of the credit system.
The People's Bank of China added 90 billion yuan ($ 14 billion) of funds on a net basis through $ 50 billion in seven-day reverse repo arrangements and $ 50 billion at 14 days on Friday, offsetting 10 billion maturities, the largest. one-day injection from February; marked the first time this month added more than 10 billion yuan of short-term liquidity into the banking system in a single day.
While Evergrande's insolvency is clearly the biggest cause, there are also periodic liquidity needs related to the holidays in China in the first week of October. All this only accentuates the effect of the Evergrande crack.
Some Western analysts believe that in reality the situation is not so worrying, but it is clear that the PBOC is holding other weapons ready to respond to a possible credit crisis, including the possibility of a reduction in interest rates on the money market that would free many resources. Currently, the seven-day repo rate, refinancing, is at its highest since June 30, at 2.4%.
All this happens at a time of fragility also for the Chinese giant, with the services sector in difficulty, also due to the local returns of Covid that have put the service and tourism sector in tension. Furthermore, the growth of the last few months shows signs of fatigue. For these reasons, the PBOC will not be able to ignore the crisis of the colossus Evergrande.
Thanks to our Telegram channel you can stay updated on the publication of new articles of Economic Scenarios.
The article The PBOC puts liquidity into the system to counter the crisis Evergrande comes from ScenariEconomici.it .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/la-pboc-mette-liquidita-nel-sistema-per-controbattere-la-crisi-evergrande/ on Fri, 17 Sep 2021 16:46:34 +0000.