Recently, the PBC held a meeting with commercial banks to study and implement the decisions adopted at the Central Economic Work Conference, to brief works on the discussions and decisions of the PBC Work Conference, to make arrangements for liquidity management in the banking system around the Spring Festival to maintain liquidity at reasonable and adequate volumes and reinforce financial support to the real economy.

The participants were of the view that the China economy entered a stage of new normal, a critical period of economic restructuring. As was set out in the 18th CPC National Congress and its Third, Fourth and Fifth Plenary Sessions, as well as the Central Economic Work Conference and the PBC Work Conference, it was necessary to implement the prudent monetary policy to support works in five priority areas in 2016.

The participants pointed out that, since cash supply has come to the peak period in the run-up to the Spring Festival, due to the heightened volatility in international financial markets, the liquidity in banking system has become more volatile. Strengthened monitoring and forecasting, combined with comprehensive use of various monetary policy tools, will be needed to adjust and maintain adequate liquidity in the banking system, in order to ensure stable market interest rates and reinforce financial support to the real economy. In view of the composition and duration features of liquidity gap before the Spring Festival, the PBC will strengthen pre-emptive adjustments and fine-tunings and arrange in advance the liquidity management around the Spring Festival, to effectively meet the liquidity needs of commercial banks. For short-term and seasonal cash demand, the PBC will continue the practices of past years to cover all major financial institutions through open market repo operations, which upon maturity after the Spring Festival will be offset by the cash withdrawn from circulation. For mid-term liquidity needs, the PBC will provide a total amount of more than 600 billion yuan through operations including Mid-term Lending Facility (MLF), Standing Lending Facility (SLF), and Pledged Supplementary Lending (PSL). First, based on the needs of financial institutions, the PBC will conduct MLF operations and cut the three-month interest rate of MLF to 2.75%. Second, for liquidity needs of qualified small and medium financial institutions, the PBC will continue to provide financial support through SLF operations and central bank loans pledged with credit assets. Third, to meet the need of key areas and weak sectors of the economy, the PBC will continue to provide funds through PSL operations and credit policy supporting central bank loans.

The meeting urged commercial banks to accurately understand the features of cash circulations around the Spring Festival, organize in-depth analysis on the changes of liquidity situation, collect comprehensive information of market demand, enhance the liquidity and asset-liability management, to help strengthen confidence that the economic growth is stable and turning for the better, and to serve the real economy with improved abilities.