China's central bank drained 40 billion yuan (around 5.82 billion U.S. dollars) from the market on Thursday.
This marks the first day that the People's Bank of China drains liquidity from the market after it injected money into the market for five consecutive days.
On Thursday, the central bank conducted 20 billion yuan in seven-day reverse repos, 20 billion yuan in 14-day reverse repos and 10 billion yuan in 28-day reverse repos.
A reverse repo is a process by which central banks purchase securities from banks with an agreement to sell them back in the future.
With 90 billion yuan worth of reverse repos maturing on Thursday, the central bank effectively withdrew 40 billion yuan from the market.
The central bank said in a statement on Tuesday that it will extend a favorable policy that allows banks with big lending to small and agricultural firms to enjoy a lower cash reserve ratio.
The statement also showed a falling bad loan ratio and better profits for banks last year.
Chinese lenders saw the ratio of their non-performing loans fall to 1.74 percent at the end of 2016, slightly down from 1.76 percent a quarter ago.
Banks reported faster profit growth thanks to a firming economy. Net profits of commercial lenders increased 3.54 percent year on year, up 1.11 percentage points from a year ago.