China's central bank cut its overnight funding rate to 1.25% and its buyback relending rate to 1.00%, yet drained a net RMB1.36tn and lifted banks' FX reserve requirement to 6% from 4% to slow the yuan. The official manufacturing PMI fell to 49.3.
Beijing is reversing its 2023 FX-reserve cut with a 2021-style lever last used when the yuan was strengthening too quickly. Source
The People's Bank of China (PBOC) pulled three levers this week, and they don't point the same way. It cut the price of overnight funding and the cost of equity-support loans. It tightened the foreign-exchange channel. And every day it took more cash out of the banking system than it put in. Taken together, this looks less like stimulus than a bid to create room for easing without a headline rate cut.
