In an effort to address a seasonal cash squeeze that is worsened by capital outflows, China's central bank will inject 50 billion yuan ($8 billion) into their banking system, effectively increasing its re-lending quota.

The tactic the People's Bank of China is now using is one that they have not used in over a year. With it though, they hope to boost the liquidity of Chinese lenders. The central bank used reverse-repurchase agreements, which is the purchase of securities in order to sell them at a much higher price later on. Doing this injected 50 billion yuan into their system already.

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In addition, they also rolled over 269.5 billion yuan of three-month loans to lenders in October in order to add another 50 billion yuan to smooth the supply before Lunar New Year.

Liu Gang, head of Greater China economics says that the move of the Central bank to roll over loans as well as reverse-repurchase agreements is a sign that there will be no broad-based easing. The easing he refers to is like a possible reserve-requirement ratio in the first quarter.

The central bank's real aim is to revive their economy that has been expanding at the slowest pace for the past two decades. They reduced their benchmark rates last November in order to reach this.

Guan Tao, head of the balance of payments department at China's State Administration of Foreign Exchange, said that China is expecting to record deficits in its capital account in the fourth quarter. The position of Yuan in the central bank's balance sheet fell 128.9 billion in December. The data showed that this was the most that it had done so since 2003.

China's foreign-exchange reserves also fell to $3.84 trillion in December from the previous all-time high of US $3.99 trillion in June. 

Tagspeople's bank of china, 50 billion yuan, inject, US $8 billion