Beijing has pumped a record amount of short-term cash into its financial system to shore up lending in recent days, only to elicit a refrain familiar to China watchers this year — not enough, more required.

Signals in the money market show traders expect borrowing costs to remain elevated for the rest of the year, despite the cash injections. A one-year gauge of bank funding costs in the market has shot up above the level the People’s Bank of China lends at, an unusual occurrence since 2019 that points at scarce liquidity in the system.

Expectations for a surge in government debt that were confirmed by President Xi Jinping Tuesday and seasonal tax payments have burnt through a large amount of cash available to banks, prompting the PBOC to ramp up support to ensure borrowing costs won’t reach levels unaffordable to a fragile economy.

The central bank has added a record net 1.96 trillion yuan ($268 billion) in short-term cash in the past three days, while outstanding one-year policy loans are on track to reach an all-time high 5.7 trillion yuan after a mid-October operation, Bloomberg calculations show.

But Becky Liu, head of China macro strategy at Standard Chartered Bank, is among those counting on the PBOC to deliver even more support. She expects it to come via multiple tools into year-end, including potential cuts to banks’ reserve ratios and continued cash injections via the medium-term lending tool.

An expansion of the PBOC’s structural facilities including re-lending and re-discounting is also “highly likely,” as these tools will provide lower-cost term funding to banks at a time when their net interest rate margins are severely compressed, Liu said.

Xi Steps Up Economic Aid With New Debt Issuance, PBOC Visit

President Xi Jinping has stepped up support this week for the world’s second-biggest economy, issuing additional sovereign debt, raising the budget deficit ratio and even making an unprecedented visit to the PBOC. The plan includes issuing additional sovereign debt worth 1 trillion yuan ($137 billion) in the fourth quarter to support disaster relief and construction.

Meanwhile, money market traders remain uncertain over the PBOC’s plans to roll over 1.5 trillion yuan of policy loans due in November and December. Derivatives show expectations of elevated borrowing costs into the future, with one-year interest rate swaps reaching the highest since May.

Banks are under pressure to keep funding stable and their liquidity situation may not improve for the rest of the year, said Li Yishuang, an analyst at Cinda Securities. The bond supply surge and shrinking deposits after previous rate cuts may leave banks more reliant on PBOC support going forward, he said.