US and China Injecting Hundreds of Billions into Financial Markets

China is putting $174 billion into the financial markets to prevent financial disruptions related to the coronavirus.

China’s central bank said it will inject 1.2 trillion yuan ($174 billion) worth of liquidity into the markets via reverse repo operations on Monday as its stock markets prepare to reopen amid an outbreak of a new coronavirus.

Chinese authorities will use various monetary policy tools to ensure liquidity remains reasonably ample and to support firms affected by the virus epidemic, which has so far claimed 305 lives.

In 2019, the US Federal reserve had put $234 billion to dampen market volatility and keep the central bank’s overnight funds level. There have been repo market problems.

In 2020, the New York Fed reserve had put nearly $100 billion for repo market intervention.

The Federal Reserve had been trying to reverse the quantitative easing during and after the 2007-2008 financial crisis. Quantitative Easing (QE1, QE2 and QE3) brought the Fed balance sheet to $4.5 trillion vs $700-800 billion in assets at the start of the crisis.

The world economic system is growing but is still fragile. The US and China are the main drivers of growth in the world economy. The US and China are about 40% of overall world economic growth.

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