China's banks pay record-high deposit rates for $4.6b of government cash

China’s commercial banks offered record-high deposit rates to secure US$4.6 billion of government money at an auction on Monday, highlighting a cash shortage among banks before the Lunar New Year holiday, Bloomberg reported. The finance ministry obtained a six-month deposit rate of 5.9% for the funds, up from 5.4% at a similar-sized auction in December and the highest rate paid since December 2006. The central bank’s benchmark six-month lending rate is 5.35%. "Today’s deposit rate even exceeded that of similar-dated lending, reflecting banks’ hunger for cash," said Wang Yintao, a money trader at Industrial Bank (601166.SH) in Shanghai. "The cash shortage, which is difficult to ease in the short term, was complicated by factors including month-end accounting requirements and the New Year holiday, when we traditionally see rising demand for cash."