Shadow banking behind cash crunch: Xinhua

State-backed Xinhua New Agency said Sunday that China’s surge in interbank lending rates was the result of speculative trading and shadow banking, Reuters reported. Xinhua’s commentary confirms that the central bank’s credit tightening was aimed at reducing China’s rampant informal lending, known as shadow banking, and at moderating credit growth. The report attempted to address fears that the central bank overshot its mark on tightening the cash supply. It also stated that while banks and small and medium enterprises are short on cash, there is “ample” liquidity in China, pointing to data that showed China’s money supply rising more than 15% year-on-year in May.