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China cash crunch symbolises central bank policy quandary

First published:, 24/12/2013

Money squeeze symbolises a major and unpredictable medium-term policy struggle

China’s financial markets are under pressure for the second time this year. Interbank rates and bond yields have been rising steadily for several weeks and spiked recently when the People’s Bank of China abstained from accommodating seasonal demand for cash.

The PBoC then relented before last weekend and this week. The immediate outlook, while probably volatile, is most likely manageable without too much fuss but the crunch in financial markets symbolises a major and unpredictable policy struggle over the medium-term to tame rapid credit creation, and allow a market-determined cost of capital to emerge….”more:”