China's central bank pledged on Sunday to use a mix of policy tools to adjust banking liquidity to ensure steady credit growth, in an apparent bid to soothe market concerns about tighter monetary conditions.
The central bank will "use a mix of price and quantitative policy tools to adjust liquidity in the banking system and guide steady and appropriate growth in money, credit and social financing", it said in a statement on its website.
The central bank allowed short-term interbank borrowing costs to spike to close to 30 percent on June 20, a blunt warning to overstretched lenders that they must bring risky lending under control.The cash crunch - caused by factors including fast credit growth, the regulatory deposit reserve requirement and a crackdown on hot money inflows - is abating after the central bank signaled its readiness to soothe market volatility. The People's Bank of China (PBoC), while affirming its prudent monetary policy, also said a temporary jump in short-term interest rates would not hurt the real economy. "Overall, liquidity in the banking system remains ample," it said.
