The economic might of China has been put on flamboyant display over the last three days. The People’s Bank of China doled $58bn into the money markets, the largest amount ever spilt in a single week in financial history.
It was done via ‘reverse repurchase agreements’, where the bank buys up securities on the condition that they will sell them at a higher price at a later date. We’ll leave the exact mechanics to the guys on the trading floor, but the important bit is that it cleared the blockage.
After more than a decade of explosive economic growth, China’s economic expansion has been gradually slowing. The last year or so has been the slowest yet. Chinese investors have been hoping that the government would step in to make things easier, especially by reducing the amount of money that banks have to keep in reserve.
Watch out though, China. We all know what happened in the UK once those buffers got too small…