One culprit: The People’s Bank of China is showing that it’s very disinclined to step in and smoothe over tight liquidity conditions.
Instead it’s telling the banks to deal with their own mess.
Nomura’s Zhiwei Zhang passes allong the message from the PBOC in a brief note
The guidance note stated that “overall bank liquidity conditions are at a reasonable level” and asked banks to “prudently manage liquidity risks that have resulted from rapid credit expansion”, “appropriately contain the pace of loans and bill financing” and “utilise the stock of money and credit to support the economy”. We believe these statements suggest that the central bank’s policy stance remains tight. The decision to put this note on its website suggests the PBoC wants to reiterate its policy stance.
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