China's central bank has provided emergency funding support to commercial banks and will add more cash into the system on Tuesday, as the bank responds to a spike in cash rates ahead of the Chinese New Year, the bank announced on Monday.
The move by the People's Bank of China (PBOC) comes after the interest rate that banks charge each other for short-term loans spiked in recent days.
Bankers and analysts say the PBOC is attempting to strike a balance by guiding inter bank interest rates steadily higher to reduce excess credit growth, while avoiding an acute credit crunch that could spark panic and choke off financing to the real economy.
The problem is a short term measure and more concrete measures will needed soon to eradicate this problem, which can ultimately lead to the break down of the system.
The move by the People's Bank of China (PBOC) comes after the interest rate that banks charge each other for short-term loans spiked in recent days.
Bankers and analysts say the PBOC is attempting to strike a balance by guiding inter bank interest rates steadily higher to reduce excess credit growth, while avoiding an acute credit crunch that could spark panic and choke off financing to the real economy.
The problem is a short term measure and more concrete measures will needed soon to eradicate this problem, which can ultimately lead to the break down of the system.