14 November 2018

China money market rates soar, WSJ says

China’s short-term borrowing costs for banks is soaring on heavy demand for cash ahead of the Lunar New Year holiday and rising worries over the shadow banking sector, the Wall Street Journal reported Monday. The benchmark cost of short-term loans between banks, the weighted average of the seven-day repurchase agreement rate, rose to 6.42 percent on Monday, up from 5.17 percent Friday and 4.35 percent Thursday. Monday’s rate was the highest since Dec. 24, when it hit 6.44 percent. The scramble for cash has been sparked by individuals and companies rushing to buy gifts for the weeklong break starting at the end of next week while banks are also hoarding funds ahead of the usual month-end regulatory requirements, the report said. There is also concern over China’s loosely regulated shadow banking sector where pressure is rising on Industrial and Commercial Bank of China Ltd. and shadow lender China Credit Trust Co. to bail out investors facing a nearly US$500 million hit.

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