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A couple of weeks back, I mentioned that China would likely need to take steps to ensure ample liquidity in August. The monetary policy divergence between the PBoC and the Fed is difficult to ignore. The Chinese central bank has taken a (much) more measured approach to stimulus over the course of the crisis, and recently warned its global counterparts that excessive accommodation risks unintended consequences -- and they should know. And yet, with core CPI slumping, PPI deflation still entrenched, and retail sales struggling to rebound, additional easing seems inevitable. Read more: China’s July Data Deluge Disappoints As Retail Sales Fall Again More imminently, though, the banking system was set to help absorb some 1.1 trillion yuan in central and local government bond issuance this month. At the same time, more than a half-trillion in medium-term lending was set to mature, in addition to 100 billion in shorter-term bank repo and 1.7 trillion in CDs. Absent support from the PBoC, banks could have seen their excess reserves fall, potentially pushing up interbank rates. Well, on Monday, the PBoC offered 700 billion yuan of one-year MLF, easily enough to cover 400 billion c
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