China’s cash crunch in financial system to gradually ease: PBC

26 June 2013 04:55  [Source: ICIS news]

SINGAPORE (ICIS)--China's central bank said late on Tuesday that the country is not short of liquidity and the current cash crunch in the interbank market will gradually ease.

The People’s Bank of China (PBC) has boosted liquidity support to some financial institutions after the country's short-term interbank rates rocketed to unusually high levels during the past two weeks, according to a statement on 25 June.

As of 21 June, all of China's provisions stood at about yuan (CNY) 1.5 tr ($244bn). Usually, CNY600bn-700bn of provisions are enough to satisfy the normal payment and settlement demand, the statement added.

The factors to the current cash crunch includes fast credit growth, the concentrated collection of business income taxes, surging cash demand during the Dragon Boat Festival holiday, changes in the foreign exchange market and banks' setting aside money to meet reserve requirements, PBC said.

PBC said it will continue to carry out a prudent monetary policy. With seasonal factors and market panic waning, the current cash crunch will gradually ease, the central bank forecasted.

PBC released a statement on 24 June, in which the central bank asked the country's overstretched lenders to manage liquidity risks, indicating no intention to help ease the current squeeze.

($1 = CNY6.15)

By: Viola Pan
+65 6780 4359

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