<div id="readability-page-1"><div><p>[BEIJING] China’s central bank is taking a further step to rein in a liquidity glut in its financial system by reducing the amount of medium-term funds it lends out to banks.</p><p>The People’s Bank of China is set to withdraw a net 200 billion yuan (S$37.3 billion) via its one-year medium-term lending facility in April. That would mark the first withdrawal under this tool since February 2025, according to Bloomberg calculations based on the operation plan released late on Friday. The net drain reflects an operation size that was smaller than the amount of maturing loans.</p><p>The move is another indication that the central bank is dialling back on some of its medium- to long-term liquidity support, while keeping short-term funding conditions stable via daily open-market operations. That’s after its continued cash injections and weak credit demand led to surplus liquidity in the interbank market, driving borrowing costs to multi-year lows and fuelling a bond rally.</p><p>The central bank is likely re-balancing liquidity by removing some long-term funds and offering some short-term ones, said Zhaopeng Xing, senior China strategist at ANZ Bank China, noting the PBOC’s cash injection via seven-day reverse repurchase agreements on Monday.</p><p>China’s sovereign bonds fell, with the yield on 10-year government notes rising one basis point to 1.77 per cent. Futures on 30-year bonds dropped as much as 0.6 per cent, most in six weeks.</p><p>The net reduction via the MLF follows similar PBOC operations in three- and six-month outright reverse repurchase agreements, which saw the first net drain in almost a year in March. In April, withdrawals under outright reverse repos increased to 400 billion yuan from 300 billion a month earlier.</p><div><div><div><p>SEE ALSO</p><div><div><div><div><p><img height="3646" src="https://imageproxy.pbkrs.com/https://cassette.sphdigital.com.sg/image/businesstimes/59a705d512f57b42445539a904d60a30bd1313fce806dfdbe98033006f9dec1d/query-ZHByPTEmZj13ZWJwJnc9MjQw?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" width="5278" original-src="https://imageproxy.pbkrs.com/https://cassette.sphdigital.com.sg/image/businesstimes/59a705d512f57b42445539a904d60a30bd1313fce806dfdbe98033006f9dec1d/query-ZHByPTEmZj13ZWJwJnc9MjQw"/></p></div><p></p><h3><span>PBOC injects cash despite flush liquidity, fuelling bond rally</span></h3><p></p></div></div><div><div><div><p><img height="1334" src="https://imageproxy.pbkrs.com/https://cassette.sphdigital.com.sg/image/businesstimes/662350ff5e6e19f530c92d4d3d59bf0a59138eb6728af7047b1751dd7142a5be/query-ZHByPTEmZj13ZWJwJnc9MjQw?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" width="2000" original-src="https://imageproxy.pbkrs.com/https://cassette.sphdigital.com.sg/image/businesstimes/662350ff5e6e19f530c92d4d3d59bf0a59138eb6728af7047b1751dd7142a5be/query-ZHByPTEmZj13ZWJwJnc9MjQw"/></p></div><p></p><h3><span>China to keep benchmark lending rates steady after strong GDP data</span></h3><p></p></div></div><div><div><div><p><img height="3964" src="https://imageproxy.pbkrs.com/https://cassette.sphdigital.com.sg/image/businesstimes/4b6682671530bb12116acaca69a3e4a7615c541f5bff1a7778bff1c11a44a0d3/query-ZHByPTEmZj13ZWJwJnc9MjQw?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" width="5943" original-src="https://imageproxy.pbkrs.com/https://cassette.sphdigital.com.sg/image/businesstimes/4b6682671530bb12116acaca69a3e4a7615c541f5bff1a7778bff1c11a44a0d3/query-ZHByPTEmZj13ZWJwJnc9MjQw"/></p></div><p></p><h3><span>China’s credit growth disappoints as weak loan demand persists</span></h3><p></p></div></div></div></div></div><div><h3>Navigate Asia in<br/>a new global order</h3><p>Get the insights delivered to your inbox.</p></div></div><p>China’s overnight interbank repo rate edged up slightly to 1.24 per cent, versus a three-year low of 1.2 per cent touched earlier in April. Cost on one-year negotiable certificate of deposits, a popular funding tool issued by banks, hit a record low of 1.44 per cent last week. That’s below the 1.5 per cent cost of the PBOC’s one-year MLF reported in January.</p><p>“Rather than reflecting a proactive tightening, the fund withdrawals are more relevant to insufficient demand for liquidity in the market,” Yang Yewei, an analyst at Guosheng Securities, wrote in a note. Interbank funding costs are currently lower than the cost of PBOC’s liquidity, he added.</p><p>While the operations remove some cash from the market, the key to normalising the liquidity situation – which reflects weak credit and elevated savings – lies in improving loan demand, he wrote. BLOOMBERG</p><div><p>Decoding Asia newsletter: your guide to navigating Asia in a new global order. <span>Sign up here to get Decoding Asia newsletter.</span> Delivered to your inbox. Free.</p></div></div></div>

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<p>China's central bank is set to withdraw a net 200 billion yuan (S$37.3 billion) through its one-year medium-term lending facility in April, marking its first withdrawal since February 2025. This move aims to address a liquidity surplus in the financial system, following cash injections and weak credit demand. The central bank is balancing liquidity by reducing long-term funds while maintaining short-term stability. Consequently, yields on China's sovereign bonds have risen, reflecting the ongoing adjustments in the interbank market.</p>

- The People's Bank of China is implementing measures to manage excess liquidity in its financial system by reducing the medium-term funding offered to banks.  
- It plans to withdraw 200 billion yuan through its one-year medium-term lending facility in April, marking the first such withdrawal since February 2025.  
- This action aims to balance liquidity, as weak loan demand has led to liquidity surplus, impacting interbank lending costs and driving down bond yields.

China taps another tool to drain excess cash from market