Bank Puts Up Financial Assistance to Prevent Cash Crunch
The central bank of China stop any fears of a cash crunch by adding US$ 50 billion in just three days through the interbank market wherein rates shoot up to a high that was last seen in June after the market seized. A rapid credit growth in the second biggest economy in the last four years worried authorities that feared a rising level in debt is fueling asset bubbles.
The People’s Bank of China placed more than 300 billion yuan into the market in response to the rising rates and has hinted that the banks are willing to work alongside each other to prevent a cash crunch. The central bank are asking banks to change its assets and liability structures to enable banks to correct a mismatch in maturities since they are increasing relying on short term funds in making longer term loans
Authorities are also worrying that more loans are going through shadow banks instead to borrowers having real business needs,. Even with the disclosure created by the central bank during its latest intervention experts are saying that it’s a sign that the government is on top of the situation.