SHANGHAI (Reuters) - China is likely to inject more than 1 trillion yuan ($158 billion) into the money market in the next two months via annual subsidies from the Ministry of Finance, the official China Securities Journal on Monday quoted a research report as saying.
The injection will help improve liquidity, which has been impacted by the government’s tight monetary policy in place since October last year, the newspaper quoted the report by China International Capital Corp (CICC) as saying.
The Finance Ministry typically offers subsidies to various industries and sectors in the last two months of each year as part of distribution of the government’s annual tax income.
The ministry does not publicize these subsidies but the market estimated they totaled 1 trillion-2 trillion yuan in 2010.
The People’s Bank of China (PBOC) has not raised interest rates or bank reserve requirement ratios (RRR) since July in a sign that the government may be considering loosening its tight monetary stance amid the market turmoil sparked by the euro zone debt crisis.
The central bank previously instituted a slew of rate and RRR hikes as inflation repeatedly hit three-year highs.
Those steps offset the impact of liquidity injections via Finance Ministry subsidies late last year, but the market widely expects the PBOC will leave the subsidies to improve market liquidity this year, traders have said.
Reporting by Lu Jianxin and Carrie Ho; Editing by Jonathan Hopfner