China Unexpectedly Drains Cash as Leverage Builds in Bonds
- PBOC withdraws 40.5 billion yuan from financial system Friday
- Move shows era of super loose liquidity will end, analyst says
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China’s central bank withdrew cash from the financial system for the first time in six months, after excess liquidity had pushed an interbank borrowing cost to an all-time low.
The People’s Bank of China offered just 500 billion yuan ($77 billion) of medium-term loans to lenders on Friday, resulting in a net drainage of 40.5 billion yuan for January. Analysts had predicted a net injection of 230 billion yuan. The interest rate was kept unchanged at 2.95%, according to a statement from the central bank.