China central banker tries to reassure markets

China central bank promises to maintain stable markets after credit crunch

Associated Press

BEIJING (AP) -- China's central bank governor promised Friday to ensure there is enough money in financial markets to maintain stability after a credit crunch sparked fears of a possible crisis.

In his first public appearance since the credit crunch, Zhou Xiaochuan said in a speech in Shanghai that financial markets have adequate liquidity for normal activity. He did not mention last week's abrupt spike in interest rates but promised to ensure adequate credit.

Interest rates paid by banks to borrow from other banks jumped last week from their normal level of 2-3 percent to a record 13.4 percent when demand for loans outstripped supply and the central bank did not intervene to provide extra funds.

"We will use various tools and instruments and make timely adjustment of market liquidity to maintain the overall stability of markets," Zhou said, according to the text of the speech on the central bank's website.

The rate spike triggered a tumble Monday in Chinese stock prices on fears the country might face a credit crisis but markets later recovered most of their losses.

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