As investors digest the sharp spike in China’s interbank rates last week, the action of the central bank is now in the spotlight. Was this a considered policy to purge speculative excess from the financial system, or is the People’s Bank of China seeking to disguise a bigger problem? On the face of it, slamming the breaks on credit appears a questionable policy when economic growth is already slowing and inflation is seemingly stable. What’s more, would the central bank really engineer a cash-crunch that sent overnight interbank rates to 13% and effectively froze the interbank market? At the very least, this appears ... (full story)