Comments from HSBC on the People's Bank of China and credit market tightness

China averts cash crunch but not liquidity tightness

  • The People's Bank of China has taken several steps to calm market nerves ahead of the liquidity intensive mid-year mark.
  • While a cash crunch has become highly unlikely, moderate liquidity tightness will likely be tolerated.
  • the 7-day repo rate fixing could frequently breach the 7-day Standing Lending Facility rate of 3.45% over the mid-year accounting period and tax payment season in July.
  • China banks' funding costs continue to climb and the government bond supply pipeline will be much heavier in the second half of the year.


Stress in lending markets in China over coming weeks is something to watch for, but keep in mind, as HSBC point out, this is normal for the mid-year.

China wobbles tend to impact on the AUD.