Markets were plummeting in Shanghai early in the Tuesday section, but came back late in the day.
The saviour was the People’s Bank of China, which finally is taking a more active stance towards the extreme liquidity crunch that had engulfed the Chinese banking sector in recent days.
Via WSJ, the PBOC made a statement to the effect that it’s addressing the liquidity matters:
A People’s Bank of China official said on Tuesday that the central bank will guide interest rates to a “reasonable range,” suggesting a potential end to a cash crunch that has gripped the country’s financial system this month.
He didn’t elaborate on what constituted a reasonable range, though he said the central bank would be flexible in managing interbank liquidity. “Some seasonal factors will gradually disappear,” Mr. Ling said.
There have been various theories as to why the People’s Bank of China let overnight lending rates surge like they did. It seemed likely that to some extent it was an attempt to instill some discipline into the banking system.
Business Insider Emails & Alerts
Site highlights each day to your inbox.