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Author Topic: China injected $1.4 billion hope to increase liquidity after "Evergrand" faces a  (Read 535 times)

MiniKick

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China injected $1.4 billion hope to increase liquidity after "Evergrand" faces a crisis

The People's Bank of China (PBOC) injected 90 billion yuan ($14 billion) into the system today, aiming to avoid a tight liquidity situation in the system after China's central bank said it was declining. Evergrande China's second-biggest real estate company has been struggling with declining liquidity. And there is a risk of facing default on debt.

In addition, the People's Bank of China's liquidity ramifications are also aimed to support cash demand during the Mid-Autumn Festival next week.

Injecting $14 billion in liquidity into banks today. This is the highest amount of money injection since February this year. This is done through 7-day and 14-day reverse repos agreements. A reverse repo is the process by which a central bank purchases securities from a commercial bank in an agreement to sell it back in the future.

Today's action by the People's Bank of China comes at a time when Evergrande is struggling with liquidity. and may not be able to pay the debt as scheduled At the same time, it was assessed that Evergrande has more than $300 billion in debt, equivalent to 2% of China's gross domestic product (GDP), after it borrowed for years to support China's growing real estate sector.

The data filed with the Shanghai Stock Exchange states that Evergrande had commercial debt totaling 2057 billion yuan ($32 billion) at the end of 2020.

Analysts at Societe General Bank (Socgen) said avoiding tight liquidity in the system is a key task of the People's Bank of China. And today's injection of money has a clear goal of preventing the economy from slowing down.



 

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