Why does China’s central bank have a new cash management tool?

China’s central bank introduced a new cash management tool this week in the form of temporary bond repurchase (repo) agreements and reverse repos, adding to its various open market operations and creating what could become an important interest rate indicator.

The following explains the mechanics and intent of this new tool, which market participants say is a big step in the People’s Bank of China’s (PBOC) new monetary policy framework.

Source: REUTER