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Chinese Market Flooded With Liquidity, Driving Borrowing Costs to Record Low

Chinese government recently pledged ample liquidity to invigorate the economy faced with slowing domestic demand and escalating trade tensions with the United States.

The People's Bank of China (PBOC) injected a great amount of liquidity by means of targeted cut in reserve-requirement ratio (RRR), open market operation and the medium-term lending facility (MLF) since the start of July. The market has started to sense the change of the policy stance, with interbank borrowing costs, government bond yields and interest-rate swaps are hitting record lows.

 

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