CHINA’S central bank completed its largest weekly injection of funds into China’s banking system in seven months Thursday, aiming to give banks cash needed to support the economy following their weakest month for lending in a year.

In a move that traders and analysts saw as a substitute for a cut in banks’ required reserve ratio (RRR), the People’s Bank of China injected a net 278 billion yuan (US$43.77 billion) into the interbank money market this week, the largest net injection since early January.

Through last week, traders and analysts had widely expected that an RRR cut was imminent. Most believe that the central bank will still cut RRR by an additional 100 basis points this year, in two increments of 50 basis points, one of which is expected in the third quarter.

New yuan loans totaled 540 billion yuan in July, the lowest monthly total since July 2011. Exports and industrial output data also have indicated broad weakness in the economy.

The cash injection comes on the same day that a private survey showed China’s factories contracted by the most in nine months, hit by falling export orders and rising inventories.

The central bank’s decision to inject the funds through open market operations, rather than a cut in RRR, reflected the central bank’s abiding concern about stoking inflation.

The central bank has lowered its benchmark interest rate twice this year, in June and July, putting the one-year deposit rate at 3 percent and the one-year loan rate at 6 percent.

House prices have now risen for two straight months on a monthly basis, following eight consecutive monthly declines resulting from China’s campaign to bring prices down. Prices of agricultural produce have also crept up for five straight weeks, official data show.  (SD-Agencies)