Don't Worry About Another Chinese Credit Crunch: ANZ

Stock markets around the world had a mid-week swoon this week, when Chinese money market rates spiked and the market feared – stills fears – a repeat of the PBOC-induced liquidity crisis we saw in June.

Not so, says ANZ in a note to clients this afternoon.

ANZ says it is well past time that the PBOC “fixed the root issue”, but doesn’t believe there will be another cash crunch.

“Interest rates in China are too high, attracting capital inflows and pushing the RMB exchange rate to new highs,” according to the ANZ.

“Offering a stronger fixing to sterilise will only fuel market expectations of further appreciation. This policy is inconsistent with economic fundamentals.”

Explaining this week’s volatility, ANZ says PBOC is just reacting to the recent uptick in inflation but has learnt the lessons of June when “serious systemic malfunction ocurred”.

Global investors will be hoping the ANZ is right.

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