China’s central bank will increase the frequency of its money supply operations, with immediate effect, in a move to ensure there is ample liquidity in the banking system amid unprecedented capital outflow.

The People’s Bank of China is facing a tricky balancing act as it attempts to lower financing costs to support economic growth without resorting to heavy-handed monetary easing that could fuel capital flight.

The PBoC has cut benchmark interest rates six times since late 2014 and injected about Rmb2.5tn ($384bn) into the banking system by cutting the share of deposits that lenders must hold in reserve at the central bank. The moves were aimed at stimulating an economy that last year grew at its slowest pace since 1990.

In recent weeks, however, authorities have signalled that they do not want to engage in further interest rate and reserve ratio cuts because doing so would encourage renminbi weakness and capital outflow.

Setting aside these tools — traditionally the PBoC’s mainstays — has forced the central bank to increase reliance on open market operations (OMO) to manage the money supply. The PBoC’s main task has been to counteract the monetary contraction caused by capital outflow and central bank intervention in the foreign exchange market designed to curb renminbi depreciation. This has led to record cash injections through open market operations.

In a brief statement on Thursday the central bank said it would conduct open market operations every business day, with immediate effect. Previously such operations were usually conducted twice a week — on Tuesdays and Thursdays.

“This is mainly about improving management of liquidity risk. The PBoC can act in a timely basis to provide funds to banks that need it,” said Guo Yanhong, analyst at Fangzheng Securities in Beijing.

The new approach will bring the PBoC’s monetary policy implementation closer in line with peers such as the Federal Reserve and European Central Bank, for whom OMOs are the main tool for influencing interest rates. The PBoC had experimented with daily OMOs in recent weeks during the lunar new year holiday, when cash demand and money market volatility traditionally rise.

OMOs, in which the PBoC injects or withdraws cash from the banking system through bond repurchase agreements, are a more flexible tool for managing money supply. Unlike reserve ratio cuts — which are permanent unless the central bank actively reverses them — the impact of OMOs is temporary. The PBoC typically uses repos with maturities ranging from seven to 28 days. Once the repos mature, the PBoC can choose to roll them over or let them expire.

Beyond capital outflows, money market interest rates have assumed greater importance in China’s overall financial system in recent years. The PBoC completed the process of deregulating domestic interest rates last year when it removed the longstanding cap on bank deposit rates. A floor on lending rates was eliminated in 2013.

The end of administrative control of interest rates means that interest rates in the interbank money market now exert a greater influence on the rate at which banks lend to companies and households.

“There is pressure from capital outflow, so the PBoC increases open market operations, establishes an interest rate corridor, stabilises short term rates, and strengthens market communications,” said Li Qilin, analyst at Minsheng Securities in Beijing.