Chinese banks' liquidity boost  

Chinese banks' liquidity boost
While China's banks have been braving the storms of economic uncertainty over recent months, with many finding themselves strapped for capital, there has been some encouraging fiscal news. These banks may well find themselves receiving a cash injection – and this is down to fiscal funding rather than any signs of government policy loosening.
According to economic commentators at China International Capital Co Ltd (CICC), the nation's largest bank, the Ministry of Finance is expected to endorse the payout of over 1 trillian yuan (the equivalent of some $158.2 billion) of treasury deposits to various government departments. The Chinese government allocated around 700 billion yuan of deficit in the 2011 Budget that was adopted the following March.
Ministry of Finance data revealed that fiscal revenues amounted to around 1.2 trillian yuan in the three annual quarters from January to September last year, with expenditure peaking at 1.9 trillian yuan by the final quarter of 2012. With the impact of the huge fiscal injections being most keenly felt at year ends, the CICC predicted that China's banks will boost their overall capital strength by some 1.2 trillian yuan.
The conditions for liquidity existing in China's banks began showing signs of improvement towards November. One reason for this was the fact that the People's Bank of China (PBOC), the central bank in the country, ceased draining liquidity from the banking sector through open market operations. Recently the PBOC released 96 billion yuan into the Chinese money market.
Premier Wen Jiabao went on record as saying that China could expect a partial easing of the nationwide credit-tightening measures that had been undertaken in recent weeks. Speaking in the northern municipality of Tianjin, he stated that the government would be fine-tuning its macro control monetary policies carefully – “when the time is right”.
In other financial news, the Shanghai Interbank Offered Rate, which measures the rates it will cost each bank to borrow from another, showed a range of fluctuating points for this facility. Their one-month projection had weakened to 15.33 basis points (to 4.9242 percent). This is a strong indication of the likely liquidity outlook for China's banks in the short-term.

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