Key China liquidity measure falls to one-year low
A broad measure of liquidity in the mainland economy fell to its lowest level in nearly a year last month as the central bank allowed a credit crunch to send short-term interest rates soaring in a message to banks to reduce risky lending.
A broad measure of liquidity in the mainland economy fell to its lowest level in nearly a year last month as the central bank allowed a credit crunch to send short-term interest rates soaring in a message to banks to reduce risky lending.
Data released by the People's Bank of China yesterday showed the total social financing, a broad measure of liquidity conditions that includes bank loans and bond sales, fell to 1.04 trillion yuan (HK$1.3 trillion) from 1.19 trillion yuan in May.
The figures show the credit crunch last month had crimped both lending growth and direct financing
The decline was matched by slower growth in money supply. Broad M2 money supply rose 14 per cent year on year, the slowest pace in six months and below forecasts for a 15.2 per cent gain.
"The figures show the credit crunch last month had crimped both lending growth and direct financing," said Wang Jin, an analyst at Guotai Junan Securities in Shanghai. "The market panic made it more difficult for companies to get funding due to surging borrowing costs."
Short-term interest rates briefly shot as high as 30 per cent late last month after the central bank declined to add cash to an interbank market gripped by tight liquidity conditions, which were caused in part by a seasonal rise in demand for cash.
The central bank has said it allowed rates to zoom higher to force banks to cut risky lending, and to drive a message home to them that easy credit conditions would not last forever.
