China's Central Bank Floods the Market with Liquidity: 75 Billion Yuan to Support 'Pants' (and Chips)

While we discuss the number of parameters in new models and teraflops in graphics cards, Beijing is solving a simpler and more important question—where to get the money to keep it all spinning. The People's Bank of China (PBOC) today injected 75 billion yuan into the financial system through a seven-day reverse repo mechanism. The rate was held at 1.

40%, which under current conditions looks like an attempt to maintain the status quo while the economy is stormy and the technology sector demands ever more resources to survive in an arms race with the US. For those who skipped macroeconomics classes, let me explain on my fingers: a reverse repo is when a central bank buys securities from commercial banks with an obligation to sell them back within seven days. Essentially, it's a short-term loan to the system.

Why does this matter to us? Simple: Chinese AI companies, from giants like Baidu to bold startups like Baichuan, are operating in constant cash-burning mode. Training large language models requires colossal infrastructure investments, and access to cheap and fast money is what keeps them from closing tomorrow.

What's interesting here is not so much the number of zeros, but the stability of the rate. Holding it at 1.40% signals the market that regulators won't tighten the screws.

In a context where US export restrictions on Nvidia chips force Chinese companies to overpay for "gray" imports or invest insane amounts in developing their own accelerators like Moore Threads and Biren, any instability in the banking sector could be fatal. Beijing understands this and carefully lends support. Looking at the context of recent months, China is desperately trying to stimulate domestic demand.

The problem is that the AI industry in the Middle Kingdom is now in a situation of "double squeeze." On one hand—external pressure and sanctions, on the other—the need to prove to investors that state injections into "digital transformation" are bearing fruit. Today's 75 billion is a drop in the bucket of total debt, but an important psychological gesture.

It's a signal to venture funds that liquidity in the system exists, and they can continue feeding developers of local LLMs with promises (and money). It's also worth noting that the 7-day cycle of such operations allows the central bank to respond very flexibly to changes. If tomorrow the market panics due to new technology export restrictions, we'll see not 75 but possibly 750 billion.

For now, we're observing "life support mode." For the artificial intelligence industry, this means that plans to build new server clusters in Guangdong remain in effect, and engineers can sleep peacefully—next month's salary will be paid. The bottom line: Beijing continues to play the role of a cautious gardener, watering the tech sector just enough so it doesn't dry out, but doesn't overheat either.

Whether this liquidity will be enough for a real breakthrough in AGI is an open question, but without such injections, the Chinese AI locomotive risks coming to a halt much sooner than planned.