The Shibor overnight lending rate in Shanghai spiked violently to 29pc, with wild moves in seven-day and one-month money. The central bank refused to intervene to calm markets, apparently determined to purge excess from the credit system.
China Securities Journal, a voice of the regulators, said: “We cannot use a fast money supply growth as in the past, or even faster, to promote economic growth.”
“I am extremely concerned about China,” said Lars Christensen from Danske Bank. “They are overdoing it and are on the verge of making the same mistake as the Fed and the European Central Bank before the Lehman crisis in 2008, when they failed to see how much the economy was slowing.”
Mr Christensen said the world now risks a “perfect storm” as the Fed prepares to taper its bond purchases (QE) at the same time as tightening the spigot of worldwide dollar liquidity.
The twin effects are cascading through emerging markets, pummelling commodity exporters such as Brazil, South Africa and Russia that sell to China, but also tripping up Turkey, Ukraine, Hungary and others that rely on external funding. “Everything is being hit indiscriminately,” said Neil Shearing from Capital Economics.
The Telegraph
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