The central bank of China injected a whopping 290 billion Yuan ($46 billion) into its financial system using reverse-repurchase agreements seeking to address the ongoing cash crunch in the financial system. The People’s Bank of China exercised 190 billion Yuan of 28-day reverse-repurchase and offered 100 billion Yuan of 14-day contracts.

The record breaking amounts of reverse-repurchase are expected to meet the surge in the demand of cash before the quarter end and the holidays. The bank is unlikely to cut the reserve ratio as it came up with the idea of adding fund through reverse-repurchase agreements. This move of Chinese Central Bank is expected to inject funds in the economy just enough to meet the current currency demand, both in terms of volume and instance.

A factor that should be kept in consideration is the amount of inflation this stimulus package might develop. However, this whopping round of stimulus is expected to become effective in part due to the close monitoring of the incoming economic and financial information or developments in the coming days by the central bank and in part due to the Chinese government's unique ability to exercise significant influence over various investment trends in the Chinese economy, ultimately stimulating consumer spending and thus the economy. Further, the fact that the price fluctuation this program can bring on the prices of precious metals cannot be ignored.

Economic analysts and investors from other developed economies foresee this stimulus to enhance the Chinese economic growth rate and boost the level of output, employment, saving, investment and create multiplier effect in the economy as a whole. This action is expected to stem the decline in Chinese export of industrial goods and ultimately boost the BOT growth rate.  If China’s economy is indeed on its way to recovery, the rest of the world stands to benefit tremendously as China is the second largest economy in the world.