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China central bank calms market fears

June 26, 2013

China’s central bank tried to calm market fears of a liquidity crunch in domestic money markets. The People’s Bank of China provided liquidity to some financial institutions to stabilize money market rates and will use short-term liquidity operation and standing lending facility tools to ensure money-market rates remain at a “reasonable” level. The central bank called on commercial banks to improve their liquidity management.

Furthermore, the PBoC will “strengthen communications with market institutions, stabilize expectations and guide the market interest rates within reasonable ranges.” Chinese equity markets stabilized somewhat from the heavy sell-off in the last two days. The CSI 300 Index of Chinese equities temporarily rose 0.7%, closing 0.4% lower. The Shanghai Composite slid again as much as 1.9%, closing 0.8% in the red.