|Investors are seen at a trading hall of a securities firm in Hangzhou, capital of east China's Zhejiang Province, June 24, 2013. Chinese shares plunged on Monday and closed below a key psychological mark over worries about the liquidity crunch in the financial system and subdued strength in the world's second largest economy. The benchmark Shanghai Composite Index tumbled 5.3 percent to end at 1,963.24, the lowest point in nearly seven months, while the Shenzhen Component Index pummeled 6.73 percent to 7,588.52. (Xinhua/Ju Huanzong)
BEIJING, June 24 (Xinhua) -- China's key stock index recorded the biggest daily loss in nearly four years on Monday over worries about the liquidity crunch in the financial system and subdued strength in the world's second largest economy.
The benchmark Shanghai Composite Index tumbled 5.3 percent to end at 1,963.24, the lowest point in nearly seven months, while the Shenzhen Component Index plummeted 6.73 percent to 7,588.52.
Medium- and small-sized lenders were among the worst hit in Monday's trading, with Industrial Bank Co. shedding the daily limit of 10 percent to end the day at 13.89 yuan (2.25 U.S. dollars) per share.
Ping An Bank also went down 10 percent to 10.15 yuan, while China Minsheng Bank lost 9.95 percent to 8.51 yuan.
The plunge came as China's central bank on Monday urged lenders to control risks from credit expansion after the country's short-term interbank rates rocketed to unusually high levels during the past two weeks.
In a statement posted on its website, the People's Bank of China, the central bank, said the country's liquidity remains at a reasonable level, signalling no intention to help ease the cash crunch that investors fear would threaten the country's prolonged recovery.
"We believe this is another sign that the central bank is not willing to loosen policies or inject liquidity to bring down interest rates... and suggests that the central bank's policy stance remains tight," noted Zhang Zhiwei, chief China economist at Nomura Securities.
The Shanghai Interbank Offered Rate (SHIBOR) overnight rate, a basic gauge of interbank borrowing costs, retreated to 6.489 percent Monday from last Thursday's record high of 13.44 percent. The rate of the seven-day SHIBOR, another gauge of interbank interest, decreased to 7.31 percent, both still within a relatively high range.
Given the central bank's tight stance, Zhang forecast "a 30-percent probability" that China's GDP growth drops below 7 percent in the second half of the year.
China's central bank reiterates prudent monetary policy
BEIJING, June 23 (Xinhua) -- China's central bank said on Sunday that the country will continue to implement the prudent monetary policy while fine-tuning it at proper time. Full story
Cautious monetary stance to remain
BEIJING, June 20 (Xinhuanet) -- The central government said on Wednesday it will continue its prudent monetary stance while the world's second-largest economy slows down, with the market seeing its worst cash crunch in at least seven years. Full story
News Analysis: Liquidity crunch to plague China?
BEIJING, June 19 (Xinhua) -- The recent interest rate increases in China's inter-bank market have raised concerns over a liquidity crunch, but experts have viewed it in the context of weak economic recovery and argued that liquidity is abundant. Full story