In a one-two-three punch, the PBOC also raised the yield on the sale of one year bills by 8 basis points. The third salvo was reverse repos of 200 billion yuan.
Chinese banks have been on a lending binge, responding to its $586 billion stimulus package. These moves were a mild effort to tame the tiger so to speak.
Chinese stock and commodity markets responded immediately to the downside. Whether these moves take the edge off the boom remains to be seen.
Chinese Premier Wen Jiabao, reiterated the country's commitment to "active and appropriately loose money policy." Nevertheless, these moves will slow bank lending somewhat. The PBOC intends to drain about 700 -- 800 yuan from its banking system this year.
Do you believe that other central banks around the world will start to drain liquidity from their banking systems?
