China’s central bank drained a net 1.14 trillion yuan ($166 billion) of
liquidity in March via short- and long-term tools, marking its first net
withdrawal in about a year and likely the first net repayment of PBOC loans by
banks since May, based on calculations. The move reverses months of injections
as growth improves and rising oil prices add inflation pressure. Despite the
drain, interbank rates held near 1.3%, indicating stable conditions, with the
PBOC maintaining a “moderately loose” stance while turning more cautious on
stimulus. Analysts including Lynn Song of ING, Serena Zhou of Mizuho Securities
and Michelle Lam of Societe Generale said easing expectations may be delayed,
though some still see potential rate and reserve ratio cuts later this year.
