China’s alarming credit crunch

[marmar]

HONG KONG (MarketWatch) — As investors digest the sharp spike in China’s interbank rates last week, the action of the central bank is now in the spotlight.

Was this a considered policy to purge speculative excess from the financial system, or is the People’s Bank of China seeking to disguise a bigger problem?

On the face of it, slamming the brakes on credit appears a questionable policy when economic growth is already slowing and inflation is seemingly stable. What’s more, would the central bank really engineer a cash-crunch that sent overnight interbank rates to 13% and effectively froze the interbank market?

At the very least, this appears a reckless way to instill market discipline: It risks one default or rumor triggering unintended, wider systematic problems. ........................(more)

The complete piece is at: http://www.marketwatch.com/story/chinas-alarming-credit-crunch-2013-06-23?dist=lcountdown

[Warpy]

1. They probably have less idea what to do than we have

at this point. At least we have a track record in the 1930s to refer to when the mobs are outside the Senate and threatening to burn the building down around Congress's ears. They were still largely a feudal country back then, dealing with floods and regional famines but not a large economy. They're flailing around and it shows.