Hot words

Cash crunch 錢荒 (qian huang)

On June 20, the benchmark lending rate in Shanghai soared to a record 13.44 percent, causing concerns over the health of the Chinese economy and financial system. The record increase in inter-bank lending rates means China is facing a "cash crunch", with banks and other lenders scrambling for funds but being reluctant to borrow.

With the easing of inter-bank interest rates this week, the cash crunch in the inter-bank market - where banks borrow from each other - has sent the Chinese stock market tumbling. Experts, however, say the cash crunch is temporary and attribute it to the structural liquidity shortage caused by a mismatch of funds. In fact, China is not short of funds; it's just that the money is not in the right place.