(Yicai) Jan. 23 -- The People's Bank of China pumped CNY700 billion (USD100.5 billion) of net liquidity into the market today through its medium-term lending facility, a much bigger infusion than last month, in order to ensure adequate liquidity throughout the Chinese New Year holiday period next month.

The central bank will conduct a CNY900 billion one-year MLF operation today, the PBOC said yesterday. CNY200 billion in MLF loans are due to mature this month, resulting in a net injection of CNY700 billion. This marks the 11th consecutive month that the PBOC has hiked MLF rollovers, and the amount is much higher than December's CNY100 billion.

Earlier, on Jan. 15, the PBOC completed a CNY900 billion (USD129.2 billion) six-month outright reverse repo operation to offset CNY600 billion of maturing loans, resulting in a net injection of CNY300 billion. With today's MLF move, medium-term liquidity injections by the PBOC this month have hit CNY1 trillion (USD143.6 billion).

By significantly boosting medium-term liquidity, the central bank can counter any potential cash shortages ahead of the holiday period, to keep ample liquidity in the banking system, Wang Qing, chief macroeconomic analyst at Golden Credit Rating International, told Yicai. This will help support key projects and sustain the momentum of economic recovery.

During the Lunar New Year holiday, which runs from Feb. 15 to Feb. 23 this year, people’s need for cash usually spikes, Wang said. On top of this, local governments received their new debt quotas early this year, meaning there will be sizable government bond issuance this month, which also creates a demand for funds.

Given the larger injections through both reverse repos and MLF loans, the likelihood of the central bank cutting the reserve requirement ratio in the short term is low, said Ming Ming, chief economist at CITIC Securities. However, under a flexible and efficient policy stance, there is still room for both interest rate cuts and RRR reductions in the long term, he added.

Editors: Dou Shicong, Kim Taylor