China's central bank skipped the open market operations of reverse repos Monday. This was the eleventh consecutive business day that the People's Bank of China (PBOC) has halted the process, where it purchases securities from banks with an agreement to sell them back in the future.
The PBOC said that though liquidity in the banking system had declined it was still at a relatively high level. The government sped up fiscal spending at the end of last month. Fiscal expenditure allows fiscal deposits to flow into commercial banks from the central bank, improving market liquidity.
In the interbank market, the overnight Shanghai Interbank Offered Rate, which measures the cost that Chinese banks lend to one another, dipped 5.37 basis points to 2.4420 percent Monday, with the rate for one-week loans falling 3.40 basis points to 2.7070 percent.
China has pledged to pursue a prudent and neutral monetary policy in 2017, with M2, a broad measure of the money supply, to grow by around 12 percent, one percentage point lower than the 2016 target.