The People's Bank of China surprised markets by lending 200 billion yuan ($31 billion) to financial institutions via its medium-term lending facility (MLF). According to analysts, this highlights concerns over liquidity and possible negative consequences for the economy from a trade war with the United States.
The unexpected injection of funds came just hours after US President Donald Trump said the US could impose a 10% tariff on $200 billion of Chinese goods.
The interest rate for the one-year MLF was 3.30%, the PBOC said.
The move also comes after the central bank's unexpected decision last week to leave borrowing costs for interbank loans unchanged after the US Federal Reserve raised its federal funds rate. Analysts had forecast the People's Bank of China to follow the Fed to keep the spread between Chinese and US yields stable.
China’s central bank also said that it injected another 100 billion yuan via reverse repos. The PBOC last injected funds via MLFs in early June, lending 463 billion yuan to financial institutions.
