2016/9/20 One-year Deposit Rate Quarterly GDP Growth (2003-2016) (2008~2016Q2) Monthly Inflation POcS (2008~2016M8) Open Market Operations PBoC's RMb oMo started from 1998 anks) have been chosen to imary dealers that can trade large volume onds with OMO instruments Issuance of central bank bills PBoC s OMO Instruments Example of PBoC's Reverse Repo June 29, 2015)China PBOC Injects Again Vi PBoC sells bonds(and takes back liquidity )and Reverse Repo Despite RRR Cut buys them back (and releases liquidity) in the future(28 days or more) NY50 billion via 7-day reverse repos into the interbank econdary market trading market via its open market operations on tuesday. PBoC buys or sells bonds in the secondary market to release or get back liquidi ut the deposit tio to selected banks over the Issuance of central bank bills weekend and money rates have already moved lower. PBoc issues bills to get back liquidity and releases The injection surprise as the pboc has already cut the deposit reserve ratio to selected banks over the weekend and money rates have already moved lower. 92016/9/20 9 1‐49 One‐year Deposit Rate (2003‐2016) 1.50% 2.00% 2.50% 3.00% 3.50% 4.00% 4.50% Quarterly GDP Growth (2008~2016Q2) 1‐50 11.30% 11.00% 10.60% 9.60% 6.60% 7.50% 8.20% 9.20% 12.10% 11.20% 10.70% 10.40% 9.70%9.60% 9.40% 9.20% 8.10% 7.60% 7.40% 7.90% 7.70% 7.50% 7.80%7.70% 7.40%7.50% 7.30%7.30% 7% 7% 6.90%6.80%6.70% 6% 7% 8% 9% 10% 11% 12% 13% 2008Q1 2008Q2 2008Q3 2008Q4 2009Q1 2009Q2 2009Q3 2009Q4 2010Q1 2010Q2 2010Q3 2010Q4 2011Q1 2011Q2 2011Q3 2011Q4 2012Q1 2012Q2 2012Q3 2012Q4 2013Q1 2013Q2 2013Q3 2013Q4 2014Q1 2014Q2 2014Q3 2014Q4 2015Q1 2015Q2 2015Q3 2015Q4 2016Q1 2016Q2 Monthly Inflation (2008~2016M8) 1‐51 ‐2% 0% 2% 4% 6% 8% 10% 08M1 08M4 08M7 08M10 09M1 09M4 09M7 09M10 10M1 10M4 10M7 10M10 11M1 11M4 11M7 11M10 12M1 12M4 12M7 12M10 13M1 13M4 13M7 13M10 14M1 14M4 14M7 14M10 15M1 15M4 15M7 15M10 16M1 16M4 16M7 PBoC’s Open Market Operations • PBoC’s RMB OMO started from 1998. • In 2012, 50 financial institutions (mainly commercial banks) have been chosen to be the primary dealers that can trade large volume of treasury bonds with PBoC. • OMO instruments – Repo – Reverse repo – Secondary market trading – Issuance of central bank bills 1‐52 PBoC’s OMO Instruments • Repo (and Reverse repo) – PBoC sells bonds (and takes back liquidity) and buys them back (and releases liquidity)  in the future (28 days or more) • Secondary market trading – PBoC buys or sells bonds in the secondary market to release or get back liquidity • Issuance of central bank bills – PBoC issues bills to get back liquidity and releases liquidity when bills are due. 1‐53 Example of PBoC’s Reverse Repo • (June 29, 2015) China PBOC Injects Again Via Reverse Repo Despite RRR Cut – The People's Bank of China unexpectedly injected another CNY50 billion via 7‐day reverse repos into the interbank market via its open market operations on Tuesday. – The injection came as a surprise as the PBoC has already cut the deposit reserve ratio to selected banks over the weekend and money rates have already moved lower. – The injection came as a surprise as the PBoC has already cut the deposit reserve ratio to selected banks over the weekend and money rates have already moved lower. 1‐54