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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
Updated on

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.