People's Bank of China moves to reassure financial markets

26 June 2013

China's central bank has said it will prevent any lasting credit crunch in the country, a move that calmed financial markets.

However, stocks continued to slip as investors prepare themselves for less prosperous conditions in the world's second largest economy, Reuters reports.

The People's Bank of China (PBOC) said it had helped some banks and was ready to act again should it need to. However, it also reiterated its stance on tightening market conditions as it seeks to slow the sharp growth in informal lending.

Its decision to allow short-term borrowing costs to increase last week has led to fears that a temporary squeeze could result in a lasting credit crunch, which has had an impact on global markets.

The PBOC has warned banks they needed to manage liquidity more carefully and effectively to reduce the reliance on short-term borrowing. This adds to expectations of tougher business conditions in the country and slower economic growth.

By Tony Aynsley

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