Even as China’s financial markets are under pressure from rising short-term funding rates, political support in state media for the PBOC’s tightening campaign has only strengthened. As other agencies add to the PBOC’s efforts, the central bank is calling for “coordination,” as regulatory overreach could generate internal political resistance. Monetary easing steps are only likely to arrive through two channels: a sharp slowdown in growth, or a credit event that generates concern among China’s leaders about systemic stability.
