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PBOC send tightening signals as China stocks collapse

China’s shares slid nearly 3 percent on Thursday on concerns that recent central bank behavior had signaled the beginning of a tightening cycle.

The Shanghai Composite Index traded down 2.75 percent by mid-day.

Analysts said that investors were worried the central bank was draining funds more aggressively than expected. The People’s Bank of China let a net 910 billion yuan ($145.89 billion) drain from the interbank market this week.

“The central bank drained over 800 billion yuan from the money market, which sparked worries that liquidity conditions might be tightening,” said Chen Shaodan, analyst at New Times Securities.

In addition, the central bank this week returned to using longer-term forward repos to drain funds, instead of reverse repos which inject funds, for the first time since June.

CNBC [1]

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