PBOC's liquidity boost raises fears over third-quarter Chinese GDP data
Central bank reported to be pumping cash into mainland lenders to combat slowing economy
News of a 400 billion yuan (HK$506.6 billion) boost in liquidity to regional and mainland-wide banks on the eve of today's release of quarterly economic data signalled that the mainland economy probably grew more slowly than expected between July and September.
Mainland media said yesterday that the People's Bank of China would inject up to 400 billion yuan into 20 joint-stock banks, doubling a figure reported late on Friday.
The yield on mainland 10-year government notes fell 10 basis points on the news.
Beijing is set to release figures for third-quarter gross domestic product growth today. Some analysts say growth may have slowed to as low as 7.3 per cent, the slowest pace in five years.
The data will come on the heels of other disappointing figures, such as lower-than-expected inflation in consumer prices and the slowest growth in fixed-asset investment since 2002.
Analysts said reports of the central bank move were probably intended to soften market reaction to weaker-than-projected GDP results.
"It should be a sign that third-quarter GDP growth will be lower than expected," said ANZ Bank chief China economist Liu Ligang. "Otherwise they wouldn't do this before the release of the data."
The central bank has yet to comment on the liquidity boost, which mainland media reports have put at between 200 billion and 400 billion yuan in the form of either pledged supplementary facilities or standing lending facilities, both regarded as non-conventional monetary tools compared to levers such as cuts to reserve ratio requirements.
The PBOC supplied the mainland's five biggest banks last month with a total of 500 billion yuan in standing lending facilities, which mature in three months and are not collateralised.
A new burst of liquidity in the market would help counteract rising lending rates as banks become increasingly wary of deteriorating asset quality in sectors such as residential property, according to a note from Yuanta Securities.
The mainland's housing market has slowed considerably since the start of the year, with home prices falling in almost all major cities. The lending facilities to banks would be just one of many recent moves that could revive the flagging sector.
The reported yesterday that regulators might reduce the period in which second-hand house transactions are subject to a 5 per cent tax from five years to two years.
Forty-one of the 46 cities that introduced home purchase restrictions have relaxed them, while the central government said last week it would waive several fees and valuation charges for new and existing homes financed by its provident fund.
Mortgage and interbank rates have declined since mid-September after the 500 billion yuan injection, according to Mizuho.
"It makes sense that the PBOC hopes some of the money goes to support the housing market," said Ha Jiming, Goldman Sachs vice-chairman and chief investment strategist of private wealth management for China, although he noted that the central bank does not dictate how the facilities should be lent out.
