(Bloomberg) — China’s central bank is making the biggest medium-term liquidity injection since 2020, stepping up efforts to support the nation’s economic recovery and debt sales.
The People’s Bank of China added a net 289 billion yuan ($39.6 billion) into the financial system via a one-year policy loan on Monday, the most since Dec. 2020. At the same time, it drained a net 134 billion yuan of short-term liquidity through open-market operations.
The nation is tussling with a stuttering economy, with consumer prices reflecting weak demand while data released last week showed the amount of loans made missed expectations. Beijing as well as local governments are ramping up debt sales to finance stimulus spending, reinforcing the need for more liquidity in the financial system.
“The additional liquidity injection aims to maintain stable interbank liquidity conditions amid rising LGB debt swap bond issuance, as well as stronger liquidity demand during tax payment times,” said Becky Liu, head of China macro strategy at Standard Chartered Bank, referring to local government bonds. “It also reflects stronger liquidity demand by commercial banks.”
The PBOC kept the MLF interest rate unchanged at 2.5%, in line with expectations. Yields from two-year to 10-year sovereign bonds rose by one to three basis points on Monday.
The move comes as Beijing considers a new round of stimulus to help the economy meet the official annual growth target of around 5%. The Ministry of Finance sold 1.2 trillion yuan of central government bonds in September, 60% higher than the average for the same period in the past three years, Bloomberg-compiled data show.
More supply is arriving, including a 1 trillion yuan program to help regional governments refinance hidden debts — a risk that Beijing is keen to reduce. Policymakers are also weighing additional sovereign bond sales of at least 1 trillion yuan for spending on infrastructure, Bloomberg News reported earlier.
Liu said the PBOC may cut the one-year MLF rate before year end, and recommended buying cash bonds on the expectations that “China rates remain a lower-for-longer story on the back of likely continued sub-par growth during the current period of economic transition.”
Uneven Recovery
Official data on Friday showed a surprise flatlining of the consumer inflation rate last month, though other recent indicators such as exports have suggested the slowdown may be moderating. Authorities have rolled out piecemeal measures to buttress the economy but refrained from big stimulus.
China’s monetary policy will make better use of both aggregate and structural tools, central bank chief Pan Gongsheng said in a statement on Saturday, referring to broad moves that affect overall liquidity and targeted ones to aid certain industries. It will seek more sustainable growth while maintaining a “reasonable” expansion pace, he said.
Though markets are still cautious about the precarious economic recovery, financial institutions ranging from Citigroup Inc. to JPMorgan Chase & Co. have upgraded growth targets earlier this month after some improvement in indicators including manufacturing activity.
The cash injection should “offset the demand from government bond supply this week,” said Zhaopeng Xing, senior China strategist at Australia & New Zealand Banking Group Ltd. “The tight liquidity may ease in the second half of October, as the authorities mandated local governments to spend all money raised by bonds before the end of October.”
OTTAWA – The parliamentary budget officer says the federal government likely failed to keep its deficit below its promised $40 billion cap in the last fiscal year.
However the PBO also projects in its latest economic and fiscal outlook today that weak economic growth this year will begin to rebound in 2025.
The budget watchdog estimates in its report that the federal government posted a $46.8 billion deficit for the 2023-24 fiscal year.
Finance Minister Chrystia Freeland pledged a year ago to keep the deficit capped at $40 billion and in her spring budget said the deficit for 2023-24 stayed in line with that promise.
The final tally of the last year’s deficit will be confirmed when the government publishes its annual public accounts report this fall.
The PBO says economic growth will remain tepid this year but will rebound in 2025 as the Bank of Canada’s interest rate cuts stimulate spending and business investment.
This report by The Canadian Press was first published Oct. 17, 2024.
OTTAWA – Statistics Canada says the level of food insecurity increased in 2022 as inflation hit peak levels.
In a report using data from the Canadian community health survey, the agency says 15.6 per cent of households experienced some level of food insecurity in 2022 after being relatively stable from 2017 to 2021.
The reading was up from 9.6 per cent in 2017 and 11.6 per cent in 2018.
Statistics Canada says the prevalence of household food insecurity was slightly lower and stable during the pandemic years as it fell to 8.5 per cent in the fall of 2020 and 9.1 per cent in 2021.
In addition to an increase in the prevalence of food insecurity in 2022, the agency says there was an increase in the severity as more households reported moderate or severe food insecurity.
It also noted an increase in the number of Canadians living in moderately or severely food insecure households was also seen in the Canadian income survey data collected in the first half of 2023.
This report by The Canadian Press was first published Oct 16, 2024.
OTTAWA – Statistics Canada says manufacturing sales in August fell to their lowest level since January 2022 as sales in the primary metal and petroleum and coal product subsectors fell.
The agency says manufacturing sales fell 1.3 per cent to $69.4 billion in August, after rising 1.1 per cent in July.
The drop came as sales in the primary metal subsector dropped 6.4 per cent to $5.3 billion in August, on lower prices and lower volumes.
Sales in the petroleum and coal product subsector fell 3.7 per cent to $7.8 billion in August on lower prices.
Meanwhile, sales of aerospace products and parts rose 7.3 per cent to $2.7 billion in August and wood product sales increased 3.8 per cent to $3.1 billion.
Overall manufacturing sales in constant dollars fell 0.8 per cent in August.
This report by The Canadian Press was first published Oct. 16, 2024.
