China's central bank continued to add liquidity to the market Thursday before a week-long holiday in an effort to avoid a quarter-end cash crunch like the one that rocked financial markets in June.

The People's Bank of China (PBC) on Thursday added 80 billion yuan ($13.01 billion) in funds into the banking system through reverse repurchase (repo) agreements, a process in which central banks purchase securities from banks with an agreement to resell them at future dates.

This came after Tuesday's 88 billion yuan reverse repo operation, the largest single-day liquidity injection since February 7, when the PBC flooded the interbank market with 410 billion yuan in its open market operations before the Spring Festival holidays.

Thursday's 14-day reverse repo was priced to yield 4.1 percent, according to a statement on the PBC's website.

In Thursday's interbank market, the overnight Shanghai Interbank Offered Rate (Shibor), which measures the cost at which Chinese banks lend to one other, dropped by 23.5 basis points to 3.11 percent, falling for a third consecutive day. The rate surged to a record high of over 13 percent in June.

The liquidity injections revealed the PBC's intent to ease liquidity strains felt by commercial banks before the National Day holidays, from October 1 to 7, when a surge in cash demand is expected due to travel expenses and holiday shopping.

Separately, the central bank said Thursday that it will upgrade the payment system from 4 pm on September 30 to 8:30 am on October 8, so consumers can not use interbank remittance services via bank branches or online banking during the period. Instead they can use ATMs to conduct interbank remittance business.

Global Times