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MNI CHINA LIQUIDITY INDEX: Liquidity Kept Ample In March

(MNI) Beijing

BEIJING (MNI) – Liquidity across China’s interbank market tightened in March but remained ample as the People’s Bank of China (PBOC) took measures to support economic recovery and insulate the financial sector from nerves over western banks, including an unexpected cut in banks’ Reserve Requirements Ratio (RRR), the latest MNI Liquidity Condition Index shows.

The MNI Liquidity Condition Index climbed to 37.5 in March, higher than the 35.7 reading in February, with 47.2% of the traders reporting looser liquidity than last month while another 22.2% described some tightening.

The higher the index reading, the tighter liquidity.

The PBOC cut the reserve requirement ratio by 25bps in mid-March, releasing around CNY500 billion of long-term liquidity, in a move interpreted by analysts as a response to disruption in the U.S. and European banking sectors, and to maintain the momentum of economic recovery. (SEE: MNI PBOC WATCH: More RRR Cuts Seen To Keep Liquidity Ample - Bonds & Currency News | Market News)

The PBOC also conducted CNY481 billion in MLF, injecting CNY281 billion into the market after offsetting the maturity of CNY200 billion MLF. The PBOC drained a net CNY915 billion via its open market operation as of March 27, MNI calculated.

“In March, moderate tightness was felt due to huge amounts of reverse repos maturing together with large credit extension at the beginning of the year, as well as government bond issuance,” a trader in Hebei told MNI.

China’s most recent aggregate financing data beat market expectations - due to strong growth in new loans and government bond issuance. (SEE: MNI BRIEF: China's Feb TSF Strong On Robust Loans, Govt Debt - Bonds & Currency News | Market News)

The MNI PBOC Policy Bias Index showed 78% of local traders believe Beijing will maintain the current level of ample liquidity, with one trader saying this would “support real-economy recovery, which currently lacks momentum.”

Another trader added that current loose conditions decrease the systemic risks posed by local governments and property sector debt.

Looking ahead, policy advisors told MNI the PBOC would frontload liquidity easing measures, including an additional one or two RRR cuts, to further support the recovery. (SEE: MNI: China's RRR Limits Tested By US Worries, Liquidity Needs - Bonds & Currency News | Market News)


The MNI Economy Condition Index was at 75.0, down from 78.6, but 63.9% of participants remained confident in the rebound, while 13.9% traders said the recovery lacked momentum.

High-frequency data including measures of air traffic and subway riding indicated consumption has rebounded since the start of the year. (SEE: MNI: China's Consumption Rebound On Track But Risks Remain - Bonds & Currency News | Market News)

China's industrial production increased 2.4% y/y in the Jan-Feb period, faster than the 1.3% y/y growth recorded in December. Retail sales rose 3.5% y/y, surpassing expectations. Fixed-asset investment increased 5.5% y/y, faster than the 5.1% y/y increase during the same time last year.


MNI’s 7-Day Repo Rate Index was 63.9 in March, up from 57.1, with 52.8% of participants seeing the rate curve climbing in the next two weeks.

MNI’s 10-year CGB Yield Index was 61.1, up from 54.3, the highest in 9 months, with 38.9% of traders predicting a rising yield on a quick economic recovery.

The MNI survey collected the opinions of 36 traders with financial institutions operating in China's interbank market, the country's main platform for trading fixed income and currency instruments, and the main funding source for financial institutions. Interviews were conducted from March 13 – March 24.

The full report is available as a PDF:

MNI China Liquidity Index March 2023.pdf

For full database history and full report on the MNI China Liquidity Index™, please

MNI Beijing Bureau |

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