China’s money markets are experiencing significant liquidity pressure following the PBOC’s 10 bps adjustments to short and medium-term funding rates last week. Banks are currently borrowing from each other at rates higher than many loans to corporates, and at rates above PBOC-dictated ceilings. While some of this funding pressure is typical at quarter-end, the situation is not sustainable, as rising funding costs will be passed on to borrowers in the real economy.

Posted August 1, 2017
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