“Concerns about China’s economy intensified Thursday after a private measure of manufacturing came in at its lowest level in nine months. The HSBC/Markit flash China PMI survey also featured a steep drop in new export orders, indicating China is suffering from global weakness, notably in Europe.
Even more troubling is a sharp rise in interbank lending rates, suggesting Chinese banks are becoming wary about lending to each other. If you recall, the crisis of 2008 reached its apex when banks stopped lending to each other and fears of “counterparty risk” were manifest. Chinese interbank lending rates aren’t at extreme levels yet but could get there in a hurry if they continue to rise in such dramatic fashion.
According to Bloomberg, the seven-day repurchase rate rose to 10.77% overnight, its highest level since March 2003 while the one-day rate rose “by an unprecedented 527 basis points to an all-time high of 12.85%,” and intraday rates hit a record 30%.”
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