Short-term borrowing costs in China have fallen to their lowest level since the global financial crisis as Beijing seeks to help banks cope with a liquidity squeeze spurred by the government takeover of a commercial lender, said the Financial Times.
The central bank — the People’s Bank of China — has been injecting liquidity into the financial system in an effort to support lending to banks in smaller cities and rural areas that became strapped for funding after the state takeover of Baoshang Bank in May.
In response, the Shanghai interbank overnight benchmark rate, or Shibor, on Thursday fell to 0.884% — its lowest since April 2009 and just above a record low reached earlier that year as Beijing rolled out a RMB 4 trillion ($580 billion) stimulus program in the depths of the financial crisis.
Even the less volatile three-month lending rate has fallen about 0.3% in the past two weeks to 2.627%, the lowest since late 2010. However, there are signs that the cheaper borrowing costs are failing to trickle down, with an unusually large gap between credit spreads for the highest and lowest-rated banks.