China to inject US$174 billion of liquidity into markets amid new coronavirus outbreak

China’s central bank has announced it will inject 1.2 trillion yuan (US$174 billion) into markets via reverse repo operations on Monday

Investors are bracing for the worst when markets resume following a new coronavirus outbreak that has dented China’s economic activity

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The People's Bank of China will pump 1.2 trillion yuan (US$174 billion) into financial markets. Photo: Reuters

Published: 8:16pm, 2 Feb 2020Updated: 12:47am, 15 Feb 2020

China’s central bank will pump 1.2 trillion yuan (US$174 billion) into financial markets on Monday, as part of an effort by regulators to mitigate volatility when trading opens against the backdrop of a new coronavirus outbreak.

Investors in Shanghai and Shenzhen are bracing for a possibly brutal return to trading when markets resume for the first time since the Lunar New Year holiday.

The outbreak of a novel coronavirus, which has killed at least 304 people and infected more than 14,380 in mainland China, has ground economic activity to a near standstill in China, as authorities take aggressive measures to contain the flu-like disease, curbing public transport, shuttering entertainment venues and shortening business hours.

In the face of the “epidemic situation”, the People’s Bank of China (PBOC) said on Sunday it would “inject 1.2 trillion yuan via reverse repo operations on February 3 to ensure sufficient liquidity supply.”

“The liquidity of the overall banking system will be 900 billion yuan more than the same period of last year,” the central bank added.

It is the first time that the central bank has made such an announcement and also marks the largest single-day reverse repo operation it has ever conducted.

According to Reuters calculations, 1.05 trillion yuan (US$151 billion) worth of reverse repos are set to mature on Monday, meaning that 150 billion yuan in net cash will be injected.

The injection is one of 30 measures announced by multiple authorities this weekend to steel the economy against disruption from the coronavirus outbreak.