Money Shortages Appears in China Again
There are currently more concerns over
inter-bank funds in Mainland China.
An important indicator of this is Shibor
( Shanghai Interbank Offered Rate).
Analysts said that the funds rate soared, causing
the market’s concern over money shortages again.
On October 24, Shibor rose across the board.
Among them, the overnight rate rose
30.80 basis points to 4.088 percent.
Seven day interest rates rose
68.80 basis points to 4.68 percent.
14 day interest rates was up 101.1 to 4.882 percent.
30 day interest rates was up
58.6 basis points to 5.4 percent.
On October 25, the rally continued, including 30 day Shibor
rose 102.20 basis points, and 14 day 98 basis points.
On the same day, the re-purchase rate in the
inter-bank bond market was even more alarming.
Seven- day repurchase rates
rose 96 basis points to 5 percent.
14-day repurchase rates rose
253.5 basis points to 6.6 percent.
Both increases and prices in the bond market
have hit a new level since the month of June.
Statistics from the Central Securities Depository
Clearing Company further indicate this trend.
On October 24, the treasury yield curves of
5, 7 and 10 year continued to climb to 3.99%,
4.15% and 4.19%, which is a record breaking high.
Policy financial bond yield curves, affected by agricultural
development bonds, moved upward about 10 basis points.
Yields over a 3-year period and more all entered the “5” era.
In addition, since October 24, the Central Bank
suspended reverse repurchase operations, implemented
from the end of July, for the third consecutive time.
The net capital returned for about two weeks
for the Central Bank was over 100 billion yuan.
The Chinese Security Times quoted inside sources.
It said that the Central Bank’s discontinuing of
reverse repurchase operations and soaring inter
bank rates triggered concerns over money
shortages, a dismal bond yield and upward return.
Ren Zhongdao, financial analyst: “Actually, money
shortages have always been there, but the Chinese
Communist Party (CCP) just wants to cover it up.
Once the Central Bank stops open market operations-
supplying the market with money- banks feel the presence
of money shortages, so the lending rates soar overnight.”
Yin Zhongli, deputy director of Chinese Academy
of Social Science Research Center, believes that
money shortages in June stemmed from banks
needing money to meet the month-end assessment.
There were also massive capital withdrawal from China,
and Chinese people wanted to test the bank’s tolerance.
Yi thinks that the Central Bank
will learn its lesson from last time.
Yin Zhongli: “This is a short-term volatility, and
it may be caused by the monthly assessment.”
However, Ren Zhongdao thinks differently.
Ren Zhongdao: “Relationships between banks is complex.
In fact, China has only one Central
Bank, which belongs to the CCP.
Money shortages mean the Central Bank is short of money.
This is because a lot of money was transferred overseas.
The CCP also knows their collapse is
inevitable, so they sent money elsewhere.”
Meanwhile, the US stock market continued to rise to
new highs, as A shares in Mainland fell continuously.
On Friday, A shares fell unilaterally
1.45 percent, after three down days.
It not only ripped through 2150,
an important technical barrier.
It also smashed through the strong support point 2130.
By the end of Friday, the Shanghai Composite Index
closed 2132.96 points, falling 21.36 points, or 1.45 percent.
It ended with four losing days in a row.
The Shenzhen component Index closed at
8379 points, down 106 points, or 1.26 percent.
Small and medium board index fell 2.06 percent,
cumulative plunging 8.37 percent in four days.
Under stable policies and better than expected economic
data, what really causes A shares to crash as they have?
Ren Zhongdao: “On the surface, all aspects
are in a relative tight financial chain.
From other stock market scenarios, however, it may be
caused by funds shifting from the stock market to banks.
The Wall Street Journal pointed out that the CCP
attempts to make its economic growth from an
investment-driven to consumer-driven transformation.
It seeks to limit lending falls in line with this goal.
However, the Central Bank is walking on thin ice now.
If it moves too much, it may add more pressure to the
financial sector, which now suffers from money shortages.