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Credit Crunch in China

China's stock market has plunged in recent days as the People's Bank of China has tightened credit in an attempt to constrain lending and excessive credit growth in China. As a result of this credit tightening, the inter-bank rate in China (the SHIBOR) has increased substantially (story here). 

After the 2008 crisis, the Chinese monetary authorities stimulated the expansion of credit. This credit expansion has been accompanied by a 'bubble' in the Chinese property market. Is China about to experience a financial crisis akin to that experienced in the West five years ago? 

You can read more about China's credit crunch at Bloomberg, Linda Yueh's BBC blog and the Marginal Revolution blog.    

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