Beijing, 12 June 2026 – China has asked major state-owned banks to reduce lending in the interbank market, signalling that policymakers are becoming more uncomfortable with excess liquidity that has pushed short-term borrowing costs below their preferred policy level.

The move reflects a delicate balancing act for Beijing. On one hand, China still needs supportive liquidity conditions to stabilise growth, support credit demand and cushion a slowing economy. On the other, too much cash in the financial system can distort market pricing, fuel bond-market speculation and weaken the authority of the central bank’s policy signals.

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Author

Rebecca Hsu
Rebecca Hsu is a Senior Economist and Lead Analyst for The Ledger Asia, focusing on the rapidly evolving financial landscapes of East and Southeast Asia. With a background in sovereign risk assessment and emerging market trends, Rebecca provides sharp commentary on trade dynamics, monetary policy, and the digital economy's impact on regional growth.
Formerly a strategic advisor for major financial institutions in Hong Kong, she excels at translating complex macroeconomic shifts into actionable insights for investors and policymakers. Her work at The Ledger Asia centers on China’s economic transition and the burgeoning manufacturing hubs of ASEAN, ensuring readers stay ahead of Asia’s shifting financial tides.