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23 Jun 2013
PBoC intentionally attacked shadow financing, Xinhua says
FXstreet.com (Barcelona) - The People's Bank of China (PBOC) allowed the interbank borrowing rates to surge as high as 25% last week, in an order to raise awareness against the current malpractices in China's highly speculative shadow banking system.
The crackdown to absorb liquidity in the interbank market was an intentional crackdown against unacceptable lending through shadow financing - nonbank lending -, the state-run news agency Xinhua confirmed over the weekend.
The central bank aim is to send a strong warning signal to overextended banks. At the same time, Xinhua said there remains ample liquidity in the market, so that fear over a possible crisis are misrepresented. Xinhua provided statistics on the latest money supply from May, indicating it was up 15.8% on a yearly basis.
“The banks are short on cash, the stock market and small- and medium-sized enterprises are short on cash, but there is ample money supply in the market,” Xinhua said.
“Many large companies are still spending heavily and making large purchases in wealth management products. There is also a lot of hot money seeking speculative investments and private lending is still widespread.”
The hard-line stance adopted by the PBoC to pump fresh cash into the system is a clear indication that China is shifting its monetary policies from quantity to quality of market liquidity, Xinhua news agency said.
The crackdown to absorb liquidity in the interbank market was an intentional crackdown against unacceptable lending through shadow financing - nonbank lending -, the state-run news agency Xinhua confirmed over the weekend.
The central bank aim is to send a strong warning signal to overextended banks. At the same time, Xinhua said there remains ample liquidity in the market, so that fear over a possible crisis are misrepresented. Xinhua provided statistics on the latest money supply from May, indicating it was up 15.8% on a yearly basis.
“The banks are short on cash, the stock market and small- and medium-sized enterprises are short on cash, but there is ample money supply in the market,” Xinhua said.
“Many large companies are still spending heavily and making large purchases in wealth management products. There is also a lot of hot money seeking speculative investments and private lending is still widespread.”
The hard-line stance adopted by the PBoC to pump fresh cash into the system is a clear indication that China is shifting its monetary policies from quantity to quality of market liquidity, Xinhua news agency said.