Chinese propaganda officials have ordered financial journalists and media outlets to tone down their coverage of a liquidity crunch in the interbank market, in a sign of how worried Beijing is that the turmoil will continue when markets reopen today. Short-term interest rates for loans in the interbank market shot up last week in an apparent repeat of the cash crunch in June that panicked investors and exposed weaknesses in China’s debt-laden financial markets.
Money market rates surged again on Friday even after China’s central bank announced on Thursday evening that it had carried out “short-term liquidity operations” to alleviate the problem.
That prompted the central bank to publish a longer and more specific statement on Friday, in which it said it had injected Rmb300bn ($49bn) in targeted cash infusions to individual banks in recent days.
The benchmark Shanghai Composite index fell 2 per cent on Friday, its ninth consecutive day of losses and its longest losing streak in 19 years.
In response, Chinese censors have warned financial reporters not to “hype” the story of problems in the interbank market and in some cases forbidden them from using the Chinese words for “cash crunch” in their stories, according to two people with direct knowledge of the matter who asked not to be named.
The Communist party’s powerful propaganda department and various other party and government departments frequently issue bans and detailed instructions to Chinese media on “sensitive” issues that could undermine party legitimacy.
But interference in financial coverage is less common, in part because Beijing wants to encourage the global perception that China has the same modern, transparent financial markets that exist in other parts of the world.
On state-owned news websites yesterday, coverage of China’s main financial news story was limited to a few short factual reports placed in less prominent places on their sites.
Even more independent outlets known for their hard-hitting commentary and investigative reporting into China’s financial markets barely mentioned the topic on their homepages.
Caixin, regarded by many as the premier Chinese financial news outlet, featured just a short blog post on the topic buried near the bottom of its homepage.
The top story on the topic from Caijing, Caixin’s main rival, consisted of nothing more than the brief statement released by the central bank on Friday.
But there appeared to be no blanket ban on the topic as journalists from at least two big media outlets that cover general and business news told the Financial Times they had not been contacted over the story.
On the popular news portal QQ.com, one of the leading stories yesterday was an analysis of last week’s interbank market fluctuations, and several other sites carried opinion pieces from experts on the topic.
So far, the orders issued by propaganda authorities do not appear to be as severe as those issued after the cash crunch in June, when reporters and media outlets were given a written directive ordering them to “explain that our markets are guaranteed to have sufficient liquidity”.
But the apparent replay last week will be highly embarrassing for the People’s Bank of China, the central bank.