Central bank continues stimulus in wake of pandemic

The Chinese central bank cut the interest rate of seven-day reverse repurchase agreements to 2.2 percent from 2.4 percent on Monday, the biggest drop within five years, sending signals that top leaders are scaling up stimulus to avert further economic slowdown from the coronavirus pandemic.

The People's Bank of China lowered the rate via its open-market operations, after a pause starting Feb 17. Through reverse repurchase agreements, the PBOC injected 50 billion yuan ($7.1 billion) of liquidity into the banking system, according to a statement.

Ma Jun, a member of the PBOC monetary policy committee, said the rate cut indicated the country's monetary policy has stepped into a stage with stronger counter-cyclical measures.

"The decision was made after evaluating the needs of domestic production resumption and the external deteriorating economic environment," said Ma.

Experts said the cut of the reverse repurchase rate will lead to a lower rate of the medium lending facility, and to drive down the real lending rate for businesses, which is gauged by the one-year loan prime rate that will be refreshed on April 20.

China still has sufficient monetary policy space and tools, and is the only country that still leveraged conventional monetary policy, according to Ma.