The People's Bank of China injected CNY 17 billion (USD 2.7 billion) to money markets on Tuesday to ease the credit squeeze. The money was pumped in through seven-day reverse bond repurchase agreements. It can be recalled that the last time China's Central Bank introduced funds into the open market was in February. The move eased concerns in the global market about a credit crunch repeat. Last month, the country's credit squeeze brought in panic in the global markets.
In a note to CNBC, Societe Generale economist Wee-Khoon Chong said, "I see the levels [of the repo operation] more as a shift in the PBOC's stance to actively managing money market conditions to avoid a re-run of the liquidity squeeze in June." He also said that the recent turn of events signaled the end of the "era of ultra-loose and easy money." The economist also added that "liquidity has to be appropriately priced."
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