Chinese central bank - the People's Bank of China (PBOC) sold 120 billion yuan 7-day reverse repos to banks via the open market on Thursday.
PBOC injected via the reverse repo sales 150 billion yuan liquidity and via its 6-month mid-term lending facility (MLF) 110 billion yuan liquidity into financial market this week.
Analysts thought the PBOC's open market liquidity supply and concerns about Renminbi's short-term softening hinted big possibility in PBOC's future liquidity easing policies.
According to Guosen Securities, Chinese commercial banks' excessive reserve ratio might have fallen from 2.5 percent in June to 2.0 percent by the end of July, meaning financial market liquidity being less fluid than April and May and also speaking for the recent tightening of interbank capital flows.
Others held that the Chinese central bank might flexibly use, apart from the reverse repos, other regular liquidity adjustment tools such as short-term liquidity operations (SLO), standing lending facility (SLF), MLF, and pledged supplementary lending (PSL) to boost liquidity and stabilize market liquidity expectation.
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