SHANGHAI—China’s central bank has stepped up efforts to drain cash from the country’s financial system in the past week, as it seeks to curb excessive borrowing and tame frothy markets.
The cost for banks to borrow from each other, measured by the so-called seven-day repo rate, rose to 3.49% this week—a 19-month high—from 2.92% on Monday. The surge followed the People’s Bank of China’s withdrawal of a net 130 billion yuan ($18.85 billion) from China’s money markets over the four trading days until Tuesday this week, which has been partially reversed.
At the same time, the PBOC has been guiding major state-owned banks to restrict their short-term lending to other financial institutions, according to market participants.
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