The Chinese stocks dropped as the People’s Bank of China (PBOC) said its credit tightening policy would continue.
Concerns have been raised regarding the People’s Bank of China (PBOC) decision to proceed with its credit tightening policy.
Shanghai Composite SSE index declined 5.3% to 1,963.24, while the Hang Seng index closed at 2.22%. Japanese Nikkei closed at 1.26%, and the financial stocks overall, dropped to more than 7%.
Most of the state-owned Chinese banks have been charging some of the highest lending rates recently, from over 25% in most cases.
This is because the People’s Bank of China have temporarily have stopped the supply of low-priced money in order to inflict more control and reduce the reliance on credit from its banks.
Concerns were raised regarding the possible cut in the money market after PBOC’s decision, which could place the small lenders out of business. However, while PBOC sends out a warning to commercial banks to improve their cash reserves management, inter-banks left its lending rates eased on Monday.
The Chinese economy introduced a big monetary stimulus in order to enhance and increase and boost China’s economic growth, after its financial crises in 2008 – 2009.
According to reports released, the manufacturing activity in China dropped to a nine-month low.
The World Bank reduced its 2013 growth forecast for China to 7.7%, from previous forecast of 8.4%.
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