The People’s Bank of China granted lenders a net 733 billion yuan ($100-billion) of cash with the so-called reverse repurchase contracts on Friday. That came after data released this week flashed signs of a pickup in the economy last month, when consumer spending and industrial production came in stronger-than-expected. 

The injection of extra cash into the economy will offer a much-needed boost for China to maintain its growth momentum, which has been challenged by a lack of demand and a downturn in the property market this year. It will also provide lenders with sufficient funding, as central and local governments are set to sell more bonds to finance stimulus spending and as the tax payment season approaches. 

“The large injection reflects the PBOC’s efforts in stabilising the money market funding cost,” amid an increase in issuance of central and local government bonds, said Xing Zhaopeng, a senior strategist at Australia & New Zealand Banking Group.

Earlier this week, the PBOC made the largest liquidity injection since late 2020 with one-year policy loans via the so-called medium-term lending facility. Throughout this year, China has reduced the interest rate on MLF rate twice and cut the amount of cash lenders need to set aside as reserves multiple times.

Also on Friday, Chinese lenders kept the one-year loan prime rate steady at 3.45% while also leaving the five-year rate — a reference for mortgages — unchanged at 4.2%, according to data from the PBOC. Most economists polled by Bloomberg had forecast no change for either rate, given the central bank refrained from reducing costs of the MLF. 

Beijing is considering a new round of stimulus to help the economy meet the official annual growth target of around 5%. The Ministry of Finance sold 1.2 trillion yuan of central government bonds in September, 60% higher than the average for the same period in the past three years, draining cash from the system.

“With the positive surprise in third-quarter gross domestic product and better September data, the need to step up easing measures has reduced somewhat,” said Michelle Lam, an economist at Societe Generale SA. The PBOC will likely reduce policy rates by 10 basis points and also slash lenders’ reserve-requirement ratio by year-end, she added.

The country’s property crisis has remained an overhang for the economy. The PBOC has indicated that more monetary easing is still on the cards if necessary. Its head of monetary policy recently reassured investors that Beijing still has room to deal with “unexpected challenges and changes.”

The LPRs are based on the interest rates that 18 banks offer their best customers, and are published by the PBOC monthly. They are quoted as a spread over the MLF rate.