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Analysis

Chinese interbank rates

by Gabriel Stein

Mon 4 Aug 2014

Chinese interbank rates - 4.8.14 (1) Enlarge Chart loading Image

What the chart shows: The chart shows seven-day Shibor (Shanghai inter-bank offered rate); and its four-week moving average

Why the chart is important: Chinese GDP growth surprised on the upside in Q2, raising the possibility that full year growth may indeed reach the 7.5% target (particularly since this is flexibly interpreted anyway). Growth is turning out to be stronger than expected very much thanks to a series of ‘mini stimuli’, both fiscal and monetary. However, over the last few weeks, it seems that monetary policy is again tightening slightly.

This is both in terms of the PBoC’s liquidity operations, and in the slight but steady upward shift in interest rates. The Bank is also expressing greater concern about broad money and credit growth and the build-up of debt levels. On the other hand, reports of a large (Yn1tn or $162bn) loan to China Development Bank in an attempt to spur housing loan growth, argues in the opposite direction. The implication is that Chinese policy makers currently are uncertain about what to do next; and, in turn, this is likely to increase the volatility of policy and of output growth.

Chart and comments provided by Oxford Economics www.oxfordeconomics.com