Cash Ample, China Says, Dismissing Credit Crunch ; Breaking Its Silence, Central Bank Blames Commercial Bankers

By Wassener, Bettina | International Herald Tribune, June 25, 2013 | Go to article overview

Cash Ample, China Says, Dismissing Credit Crunch ; Breaking Its Silence, Central Bank Blames Commercial Bankers


Wassener, Bettina, International Herald Tribune


China's central bank insisted on Monday that there was ample cash in the banking system but stressed that the country's commercial banks needed to be better managed.

China's central bank insisted on Monday that there was ample cash in the banking system but stressed that the country's commercial banks needed to be better managed.

It was the central bank's first direct comment about a cash crunch last week that raised concerns about the health of the Chinese financial system. But it did little to ease investors' concerns, as the Shanghai composite index fell 5.3 percent -- its biggest single-day drop in nearly four years.

Other Asian markets fell, though not as steeply, and European and U.S. stocks followed their lead.

Bank-to-bank lending rates in China, which had hit record highs last week, further eased on Monday. But the stock slump was a sign that markets remain intensely nervous about China's growth prospects and the uncertainties that surround the Chinese leadership's efforts to reshape the economy.

The Shanghai composite index, which has been under pressure for months amid mounting evidence that the Chinese economy is cooling, has now fallen by more than 13 percent this year.

Most European stock indexes were down just under 2 percent on Monday, while Wall Street stock indexes were down 1.5 percent in afternoon trading.

China's interbank lending market's benchmark overnight rate, which serves as a gauge of liquidity in the financial market, stood at 6.489 percent on Monday. That was down from 8.492 percent on Friday and well below the record high of 13.44 percent it hit on Thursday, but still elevated compared with the level of about 3 percent at which it has been for most of the past 18 months.

In a statement dated June 17 but published on Monday, the central bank, the People's Bank of China, addressed some of the concerns about the cash crunch, saying that "currently, liquidity in our country's banking system is over all at a reasonable level." But, in a stern sign to Chinese lenders, it called on financial institutions to improve "awareness about preventing risks" and to "strengthen their analysis and forecasting about factors affecting liquidity."

"Follow the requirements of macro prudence in allocating assets in a sensible fashion," the central bank's instructions to lenders went on, "and cautiously control the risks that the excessively rapid expansion of credit and other assets may lead to liquidity risks. When there is turbulence in market liquidity, swiftly adjust the structure of assets."

The fact that the central bank had allowed interbank lending rates to soar last week, rather than inject money into the financial system, was widely interpreted as a deliberate effort to rein in excessive lending and force banks to focus on prudent, low-risk loans.

A buildup of debt by local governments, property developers and state-owned companies, while useful for supporting economic growth, bears substantial risks, including asset price bubbles and potentially destabilizing defaults if loans turn sour, analysts have cautioned. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited article

Cash Ample, China Says, Dismissing Credit Crunch ; Breaking Its Silence, Central Bank Blames Commercial Bankers
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
Items saved from this article
  • Highlights & Notes
  • Citations
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Search by... Author
    Show... All Results Primary Sources Peer-reviewed

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.