HONG KONG — China’s financial system is in the throes of a cash squeeze, with interbank lending rates spiking on Thursday and bank-to-bank borrowing nearly stalled, as the government tries to restructure the economy and punish speculators.
The interest rate that Chinese banks must pay to borrow money from one another overnight surged to a record high of 13.44 percent Thursday, according to official daily rates set by the National Interbank Funding Center in Shanghai. That was up from 7.66 percent Wednesday and less than 4 percent last month.
China’s central bank has refused to step in and provide additional liquidity to the credit market. Analysts say the government is holding off for a reason: the government is trying to restructure the economy and punish speculators.
A huge shadow banking operation has emerged in China in recent years, with smaller banks and trust companies borrowing from bigger state-run banks and then turning around and re-lending that money at high interest rates to private companies and property developers, usually those that have trouble borrowing.
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