China steps back from severe cash crunch


China pulled back from the brink of a severe cash crunch on Friday, with money rates falling after reports that the People’s Bank of China, the central bank, had acted to alleviate market stresses.

........Local media reported that the central bank had provided targeted cash injections to the country’s biggest banks after the interbank market almost froze on Thursday, though there was no official announcement of any special provisions.

One bond trader told the Financial Times that the PBoC had given verbal instructions to major banks to resume lending to each other, in order to get the interbank market working again.

The seven-day bond repurchase rate, a key measure of liquidity, fell 227 basis points to 8.5 per cent, indicating that the threat of an acute financial crisis had significantly receded.

But short-term lending rates remained roughly double their normal level – high enough to cause serious pain for over-leveraged financial institutions.........




source:
http://www.ft.com/intl/cms/s/0/3f468d04-da2a-11e2-98fa-00144feab7de.html#axzz2WqrRHftv
alternative:
http://www.theglobeandmail.com/report-on-business/international-business/asian-pacific-business/china-steps-back-from-severe-cash-crunch/article12738070/