'No systemic risk' from ongoing liquidity crunch

Updated: 2013-06-25 03:11

By WANG XIAOTIAN (China Daily)

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The PBOC told the big banks at a meeting on Friday to stop hoarding liquidity and ordered them to improve liquidity management.

"We see the PBOC maintaining its bill issuance in small amounts as signaling its stance of no near-term easing. At least for now, this is still just a liquidity issue and the PBOC has full control of the situation," Green said.

He said a broad-based easing is unlikely, although emergency support to prevent systemic risk is still possible.

"Liquidity could start to ease more materially in the second week of July, but rates are likely to stabilize at levels above those seen from January to April."

The PBOC issued a statement on its second-quarter monetary policy committee meeting on Sunday evening, which said that the committee had agreed to "fine-tune policy when necessary".

It also said the central bank will "contain financial risks with more solid actions".

"The financial risks in the economy are not yet fully under control. Policy tightening only started in mid-March, and a shift of policy to an easing bias would exacerbate these financial risks," said Zhang Zhiwei, chief China economist at Nomura Holdings Inc.

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