PBoC's internal meeting minutes recommended that China's January new loans are likely to surpass 2 trillion CNY, a record high, as compared with 1.47 trillion CNY in January 2015. Increased onshore borrowing has strengthened the funding demand in onshore market as well as, it appears to be that Chinese corporates have repaid some of the offshore USD borrowing and turned to the onshore market for CNY funding, further tightened up onshore liquidity conditions. Beijing's continuous intervention in FX market has worsened the CNY liquidity conditions, while China's 10-year government bond yields increased by 10-12bps in the past week.

The central bank injected 440 billion CNY money via reverse repos this morning, to further ease liquidity tightness, after funding 1.4trillion CNY in the last week.

"Past experience suggests that overall liquidity conditions will remain tight in general before the Chinese New Year" - Commerzbank