The 'Liquidity Trap' with Chinese Characteristics

It has been reported that the central bank recently took more than 100 billion yuan from the market through targeted repurchase agreements with some financial institutions. This is the first time in six months the regulator has used this tool.

What made it unlike most other repurchase agreements in the past is that they were undertaken at the request of the financial institutions. In other words, it was not that the central bank wanted to mop up excessive liquidity from the market, but rather financial institutions wanted it to take money from them.