China's central bank injects liquidity to reduce cash pressure

The SLF, created by the central bank in 2013 to provide liquidity to national commercial and policy banks, was previously limited to 10 provinces and cities.

Compounded by holiday demand and IPOs, interest rates in the money market will unavoidably edge higher in the short term. But in the longer term, the PBOC's monetary policy will continue to be guided by the principle of stabilizing money supply, Zhou said.

Chang Jian, chief China economist at Barclays Plc, said that slower GDP growth and the decline in inflation should prompt the PBOC to ease monetary policy further.

Chang characterized the recent easing as a "reluctant" move by policymakers who must weigh the need for further accommodation against the risk of fueling asset bubbles and delaying needed structural adjustments.

Chang said that additional easing could not be ruled out if inflation continued to decline or GDP growth kept weakening.

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Testing time for central bank by Agencies

Rich or poor, young or old, China's 1.3 billion residents are about to embark on the biggest movement of people in the world to celebrate the Lunar New Year with family and friends.

Factories will be shut, schools deserted and government offices closed. Cash-stuffed red envelopes will be handed out by bosses to employees, parents to kids and elders to the young.

About 2.8 billion trips will be made, including 295 million on trains, according to government estimates. Spending at retail outlets and restaurants in the holiday week last year totaled 610.7 billion yuan ($97.79 billion).

Between dumpling feasts and firework shows, spare a thought for the headache all of this poses for the People's Bank of China, which has to ensure there is enough liquidity to fund the binge of travel, shopping, drinking and gift-giving.

The PBOC has been shoveling cash into the system via reverse repurchase agreements (where the central bank buys securities from banks), expanding a standing lending facility and doing whatever else it can to ensure money markets do not seize up.

Compounding the headache this year, some 24 initial public offerings will lock up about 2 trillion yuan this week, according to estimates.

The holidays start on Feb 18 and run through Feb 24.