The Chinese central bank has taken a hard line on the country’s cash crunch, spurring a stock market rout amid concerns that its stance will harm growth prospects this year.
Finally breaking its silence over the country’s money squeeze that flared up last week, the People’s Bank of China said the onus was on lenders to better manage their own balance sheets. It also said that liquidity was at a “reasonable level”, an indication of its reluctance to answer banks’ pleas for cash injections to alleviate the market stress.
The short-term pain was felt sharply in Chinese markets on Monday, where the Shanghai Composite Index suffered its steepest drop in more than three years, falling 5.3 per cent to 1,963, its lowest level in nearly four and a half years.