The credit crunch in the Chinese interbank lending market ratcheted tighter on Thursday after policymakers signalled that the central bank wouldn’t always be the lender of last resort.
China’s State Council met Wednesday and said it will maintain prudent monetary policy while accelerating interest rate and capital account liberalisation.
“The statement sent a clear signal that no monetary easing will come in the near term,” said J.P. Morgan in a note to clients. The tough line prompted a spike in interbank funding costs.
While the central bank refuses to unleash more liquidity on demand, the stress in the interbank market is spilling over into...