Net money inflow takes heat off China's central bank
The extra liquidity means the PBOC need not lower the reserve ratio for mainland lenders
The surge of foreign exchange into the mainland last month is expected to ease pressure for monetary loosening in the near term.
But the influx is unlikely to persist, given the gloomy trade outlook and lack of appreciation in the yuan, analysts say.
Mainland banks bought a net 130.7 billion yuan (HK$162 billion) of foreign exchange last month, snapping two straight months of net sales and easing pressure in the near term for a cut in the reserve requirement ratio.
Outstanding yuan positions at financial institutions accumulated from foreign exchange purchases rose to 25.77 trillion yuan at the end of last month, data released by the People's Bank of China (PBOC) on Friday showed.
The jump of 130.7 billion yuan compares with decreases of 17.4 billion yuan in August and 3.82 billion yuan in July. The resulting increase in market liquidity makes it less urgent for the PBOC, the mainland's central bank, to lower the proportion of deposits commercial banks must set aside as reserves.
Peng Wensheng, an economist at China International Capital Corp, said: "The necessity for lowering the reserve ratio is decreasing for now."
Economists predicted before the release of the data that the central bank might cut the reserve ratio again this year after three reductions since November, increasing the funds banks can lend to counter the economic slowdown.
