China's central bank adds new policy tool to manage liquidity

BEIJING - China's central bank is expanding its monetary policy toolkit to get a better handle on liquidity in the financial system as it seeks to add more levers for fine-tuning the economy.

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The People's Bank of China (PBOC) will conduct so-called outright reverse repurchase agreements with primary dealers monthly for a timeframe of no more than a year, according to a statement on Oct 28. The move is aimed at maintaining a reasonable level of liquidity in the banking system and enriching its toolkit for monetary policy, the PBOC said.

A repo is a form of short-term borrowing used in money markets, which involves the purchase of a security with an agreement to sell it back at a specific date. Here, the securities will include sovereign bonds, local government notes and corporate debt, the PBOC added.