SHANGHAI: China's central bank has issued short-term funds to some local banks to ease liquidity strains and has also renewed some banks' medium-term lending facilities that have expired, two sources with direct knowledge of the operations said on Wednesday.
The cash was disbursed via short-term liquidity operations, or SLOs, which are usually transacted behind closed doors with individual banks that are short on funds, the sources said.
The People's Bank of China was not immediately available for comment. The sources did not give details on the size of the funds the central bank issued via SLOs.
The central bank said last month it had pumped 769.5 billion yuan ($125.91 billion) worth of three-month loans into banks in September and October via a medium-term lending facility. The loans were issued at an interest rate of 3.5 percent.
That is higher than the 2.6 percent that banks pay to savers for three-month deposits, but well below the 5.6 percent that banks charge for loans that mature in six months or less.
Sources said that 500 billion yuan of those loans, which were mainly extended to commercial banks in cities, were due for payment this week.
While some of the banks saw all of their loans rolled-over, others had either 50 percent or 80 percent of their loans renewed and the proportion was determined based on the size of their borrowing.
China's reform-minded leaders have refrained from acting forcefully, such as by cutting interest rates to bolster a softening economy, opting instead for measures targeting support for specific sectors.
Some analysts fear that may not be enough to prevent a sharper slowdown, after third-quarter data showed annual growth at 7.3 percent - the weakest since the height of the global financial crisis.
Recent purchasing managers' surveys on factory and services sectors showed the economy lost further momentum in the fourth quarter, putting the government's official target of around 7.5 percent growth for the year at even greater risk.
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