"It's very difficult to drive down lending rates in a very short time, that's the root issue," said Zhou Hao, an economist at ANZ in Shanghai who specializes in the money market.
"Short-term injections can only calm market fears; not provide long-term liquidity to drive down interest rates."
Instead, the PBOC has turned to new tools such as short- and medium-term lending facilities (SLFs, MLFs), credit lines it extended directly to banks behind closed doors. These provide liquidity, but their opacity blunts their effectiveness in guiding funding costs for heavily indebted Chinese firms lower.
Finally, a reversal of the long trend of accumulating foreign exchange reserves, combined with the increasing reluctance of companies to hold on to a yuan that slid steadily against the dollar in 2014, have choked off a major supply of liquidity.
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"The traditional channel of injecting liquidity via FX reserve accumulation has been absent," wrote J.P.Morgan economist Zhu Haibin in a research note on Thursday, adding that foreign exchange reserves fell every month in the second half of 2014.
Chinese firms sold yuan to the tune of $19 billion in December, the most in seven years, according to Reuters calculations of official banking data.
Banks' corporate clients offloaded yuan in favor of dollars to protect themselves from exchange rate losses linked to a rising U.S. currency.
Such risks have intensified as more Chinese firms, locked out of China's squeezed capital markets, have turned to borrowing in dollars offshore.
The problem is capital outflows.
Rising yields on dollar assets and a weakening yuan have diminished investor interest in holding yuan-denominated assets, while reforms have made it easier for capital to leave the country in search of better returns.
"Cross-border capital flows aren't creating much base money for the Chinese banking system," said a senior trader at a major Chinese state-owned bank in Shanghai.
Inbound portfolio flows have also shown signs of drying up of late.
In addition to the poor take-up of the Hong Kong-Shanghai stock connect program, which allows foreigners to buy Chinese stocks directly, data from Markit shows that China-exposed ETFs saw massive outflows in the fourth quarter, even as mainland indexes rose north of 50 percent.
Reuters Lipper IM data showed a similar trend among ETFs specifying China as their investment target, with the average fund seeing outflows of 275 million Chinese yuan renminbi ($44.3 million) in December, with total outflows more than 34 billion yuan that month.