China has pledged to act as a backstop for banks suffering cash shortfalls, giving rattled investors hope the country’s money squeeze could be nearing an end.
A statement by the People’s Bank of China yesterday was the clearest attempt yet by the government to calm turmoil that has shaken global markets over the past week and fuelled concerns that the world’s second-biggest economy could be on the verge of a credit crisis.
“If banks have temporary shortages in their planned funding, the central bank will give them liquidity support,” it said in the statement. “If institutions have problems in managing their liquidity, the central bank will apply appropriate measures under the circumstances to maintain the overall stability of money markets.” It had already provided money to some banks, but did not specify the amount or the banks.