China Credit Growth Set To Slow As Policymakers Clamp Down

Yesterday, a few hours after the Federal Reserve announced that it was increasing interest rates by 0.25%, targeting a range of 1.25% to 1.5% for its benchmark rate, China's central bank responded by raising the rates it charges in open-market operations and on its medium-term lending facility.

The cost of seven-day and 28-day reverse-repurchase agreements was raised by five basis points while the cost of the medium-term lending facility was also increased by five basis points, with the 1-year rate raised to 3.25%.

[klarman]

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Tightening financial conditions is high on the list of priorities for China's policymakers.  At the October Party Congress and Politburo meeting on December 8, lawmakers expressed a desire to bring credit growth under control. The Politburo set "effective control...