Executives of the People’s Bank of China announced their decision to inject $16.6 billion into the banking system. With the use of additional funds the regulator is trying to keep the interbank rates low amid the massive capital outflow from China. The Chinese central bank provided $16.6 billion (105 billion yuan) as a loan to 11 commercial banks using Medium-term Lending Facility at a rate of 3.35 per cent. The analysts say that the decision came right after the latest GDP data was released. The report showed that economic growth rate in the third quarter slipped to 6.9 per cent revealing the slowest growth since 2009. The experts believe that injection of funds into the banking system may not be the only measure taken by the PBOC’s officials. For example, economists at Bank of America think that the PBOC will use other tools, including reserve-requirements ratio cuts, open-market operations, and other liquidity management facilities in order to stimulate national economic growth and keep the interbank rates low. Nevertheless, some portfolio managers suggest paying attention to China’s booming service sector. Beijing keeps trying to make a transition to consumer-led economy, rebalancing it from manufacture and trade towards services. However, it is difficult to implement such economic reforms given the large scale of China’s economy.
