(Yicai) April 25 -- The People's Bank of China has greatly increased the scale of its medium-term lending facility, pumping an additional CNY500 billion (USD68.6 billion) into the financial system today to support government bond issuance and cushion the impact of the US government’s Reciprocal Tariffs.

The central bank released CNY600 billion (USD82 billion) of fresh funds into the financial system through one-year MLF operations, according to the PBOC’s website. This is six times the amount that is due to mature this month. It also marks the second consecutive month that the central bank has increased the size of its MLF operations, with this month’s additional injection being much higher than March's CNY63 billion.

The surge in MLF supply follows the government’s recent issuance of an unusually large batch of special treasury bonds and the acceleration of local government bond sales. The central bank is ensuring there is adequate liquidity to enable smooth financing, Wang Qing, chief macroeconomic analyst at Golden Credit Rating, told Yicai.

Escalating tariff tensions between China and the US have triggered abrupt shifts in the external trade environment since April, prompting macro policies to prioritize boosting growth. The PBOC’s sharp rise in liquidity injections underscores these efforts to step up support for the real economy, Wang said. 

The Ministry of Finance released its first batch of special treasury bonds for 2025 yesterday, three weeks earlier than last year. The size of the first batch is more than seven times what it was in 2024 at CNY286 billion (USD39.2 billion) compared with CNY40 billion a year ago and it amounts to 16 percent of this year’s planned quota.

Given the current global trade environment, real estate market situation and inflation levels, the PBOC may trim banks’ reserve requirement ratio and interest rates this quarter, Wang said. It is also possible that the central bank starts buying more government bonds on the secondary market again.

The PBOC will continue to implement an appropriately accommodative monetary policy to support the high-quality development of the economy, Governor Pan Gongsheng said at the G20 Finance Ministers and Central Bank Governors Meeting in Washington D.C. that ended yesterday.

Rising economic fragmentation and trade tensions have disrupted supply chains and weakened the global outlook, Pan said. Major economies need to take concrete action to promote international cooperation and ensure global economic and financial stability.

Editors: Dou Shicong, Kim Taylor