China’s cash crunch deepened on Wednesday after the central bank withheld funding from the financial system, putting pressure on overextended lenders.
Short-term interbank rates jumped more than 200 basis points, setting a record high at nearly 8 per cent for loans of one month or less, the latest indication of how credit has suddenly become very tight in China.
The main reason for the tightness has been the central bank’s reluctance to pump liquidity in to the money market, wrongfooting banks that had expected Beijing would support them with large cash injections, as it had regularly done before.
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