Chinese stocks and American Depositary Receipts (ADRs) of Chinese companies extended their rally on Monday, buoyed by the Chinese central bank's move to inject more liquidity into the market.

The People's Bank of China announced the launch of a new lending tool called "open market outright reverse repo operations facility" to provide additional liquidity to the banking system ahead of the yearend when trillions of yuan in loans are set to expire. Though effective immediately, the central bank did not mention this new tool in its daily open market operations statement.

The new facility allows the PBOC to trade with primary dealers on a monthly basis, further enhancing its policy toolkit. This move aims to maintain ample liquidity in the banking sector and support overall credit flow as China's economic growth slows, potentially boosting sectors like advertising that are affected by the broader economy.

Reacting positively to this liquidity injection, Chinese ADRs and stocks rallied, with shares of Nio Inc. jumping over 9%, and those of Bilibili Inc. and iQiyi Inc. rising more than 6%. Other notable gainers included Baidu Inc., XPeng Inc., and Tiger Brokers, which climbed over 3%.