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China nears credit crunch conditions as cash rates soar

China nears credit crunch conditions as cash rates soar

China money market rates have soared to their highest level since July’s mini credit crunch, despite an urgent cash injection administered by the central bank.

Seven day repo rates, a key measure of the cost of borrowing, have soared this week from 4.3% to 7.6%. The rate climbed almost 1% through Thursday night GMT and into Friday morning.

The outbreak of nervousness sent the CSI 300 composite index of leading Chinese shares down 2.3% overnight

In an attempt to ease conditions, the state-owned China Business news reported that the People’s Bank of China had injected 200 billion renminbi, or around $33 billion dollars

While traders and analysts cited some technical issues as contributing to the spike, some also blamed policy confusion at the bank.

‘The PBoC is faced with some serious challenges... and is confused,’ BoAML economist Lu Ting told the FT. ‘The PBoC finds it much more likely than before to make [operational] mistakes.’

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