I just posted on China’s tight cash market and how big banks there are pressuring the PBOC for relief.
For a bit of background on why cash is tight and what the PBOC is (not) doing about it, check out this non-gated WSJ article:
Tough Love From China’s Central Bank
- The liquidity squeeze was partly due to predictably heavy borrowing ahead of the long holiday
- Also a result of a sharp reduction in foreign capital inflows in May (partly because of a crackdown on fake export invoices, which had been increasing capital inflow January to April this year)
- Liquidity has tightened so much that the Ministry of Finance was unable to sell a third of the 15bn yuan of debt at auction last week
- There was a slight relief for liquidity at the short end on Monday, when the overnight rate fell to 4.81% from about 7 % on Friday, but there was little movement in slightly longer term funds.