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.