Chinese Central Bank Continues to Drain Cash from System

China’s central bank added fuel to fears on Thursday it was clamping down on inflation risks as it allowed cash to drain from the financial system for a second straight week, sparking a jump in short-term rates.

The move by the People’s Bank of China (PBOC) happened as Beijing stepped up its efforts to counter surging property prices in the capital in an attempt to calm rising discontent over the city’s record-high home prices.

China also widened the funding options for local governments and property companies by giving them access to the interbank bond market to finance affordable housing, a priority of Chinese leaders, sources told IFR, a Thomson Reuters publication.

Housing data this week has raised fresh concerns about property bubbles in some major cities, which could add to consumer inflation – already at a seven-month high – and add to criticism that home prices are increasingly out of reach of ordinary Chinese.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza