People's Bank of China in a closed-door meeting last week sought to reassure money-market traders that a short-term spike in interest rates would not necessarily translate into a tightening of liquidity, Reuters reported. The PBOC also warned against "excessive leverage", or borrowing, that would leave banks overexposed to sudden spikes in demand for cash, said sources who attended the meeting. China's short-term interest rates began rising sharply last week, leaving banks stretching for funds even as the central bank repeatedly declined to inject cash. Officials told traders that liquidity remained ample and the bank would maintain stable short-term monetary operations this year.
Source: