In April, the People’s Bank of China expanded its balance sheet by CNY 394 billion by raising its claims on other depository corporations under the assets and deposits of government on the liabilities side, after contracting it by CNY 1091 billion in the earlier two months. The Chinese central bank’s assets and liabilities might increase further in May to fend off financial risks in the midst of deleveraging process, according to Scotiabank.

The PBoC has injected a net CNY 70 billion via reverse repos month-to-date and a total of CNY 459 billion through its medium-term lending facility last week. It also extended CNY 47.6 billion of pledged supplementary lending loans to three policy banks to strengthen the real economy.

Meanwhile, the central bank is expected to keep the yuan relatively stable in the coming months as China has committed to stick to the basic tone of “seeking progress while maintaining stability” in 2017, stated Scotiabank. But the CNY is expected to face certain challenges in the second half of this year as China’s economic growth might decelerate slightly and market talks about the U.S. Fed contracting its balance sheet or the BoJ/ECB tapering their stimulus plans might emerge again.