Business Insider had an interesting article yesterday on the big spike in interest rates in China in mid June. From the linked article:
Basically (and this was suspected at the time) the People’s Bank of China let the rates spike as a tough measure to induce a level of tightening and discipline in the banking system.
What caused the PBOC to do this?
According to a previously undisclosed summary of a PBOC internal meeting on June 19, the central bank was especially concerned that in the first 10 days of June, Chinese banks increased lending by 1 trillion yuan ($163 billion)—an amount the central bank said “had never been seen in history.” And about 70% of that amount consisted of short-term notes that mostly don’t show up on banks’ balance sheets—making it easier for the banks to get around regulatory lending restrictions-—rather than lending the money to promising companies or projects.
Read more: http://www.businessinsider.com/why-the-peoples-bank-of-china-let-shibor-spike-2013-7#ixzz2XtdGDCDE
