PBoC injects $50bn into Chinese economy to ease credit crunch fear.

Guardian: “The People’s Bank of China is seeking to allay fears of a credit crunch after a shortage of day-to-day cash among commercial banks in the world’s second biggest economy drove market interest rates to almost 10% on Monday.” “Beijing said it would top up the $50bn in liquidity provided to the markets last week as it sought to counter concerns that China’s financial sector is gripped by the sort of squeeze that caused havoc among western banks during the crisis of 2007-08.
Benchmark interbank rates – the rates at which banks lend to each other rather than to the public – climbed to 9.8% at one stage on Monday, their highest for six months, despite the central bank’s cash injections last week.
The actions by the PBoC were a response to signs of tensions in the far east’s financial markets, caused by an earlier tightening of policy by the central bank, aimed at reducing the risk of cheap credit causing asset bubbles.
Banks in China often find themselves short of cash at the end of the year as companies increase their demand for capital and institutions have to meet tough regulatory requirements. China’s growing shadow banking system, which tends to offer higher interest rates to investors, has also been draining funds from traditional banks.”