* Central bank says added over 300 bln yuan over three days
* Benchmark rate closing on peak hit during June cash crunch
* Situation shows PBOC operational challenge - economists
* CSI300 stock index posts biggest weekly fall since February
* Commodity pricing also impacted
(Adds central bank announcement of size of intervention)
SHANGHAI, Dec 20 (Reuters) - China's central bank sought to allay fears of a cash crunch on Friday, saying it has added $50 billion in three days to the interbank market, where rates have shot to highs last seen in June when the market seized up.
Rapid credit growth in the world's second-biggest economy in the last four years has worried China's authorities, who fear rising debt levels are fuelling asset bubbles.
The People's Bank of China (PBOC) said it injected more than 300 billion yuan into China's interbank market in response to rising rates. But it hinted that banks, too, have work to do if they want to avoid a cash crunch.
The PBOC told banks to change their asset and liability structures, an order analysts say is aimed at getting banks to correct a basic mismatch in maturities, where they increasingly rely on short-term funds to make longer-term loans.
Authorities also worry that more and more loans are going to speculators through China's fast-growing shadow banks, not borrowers with real business needs.
Despite the PBOC's disclosure of its latest intervention on Friday, which experts welcomed as a sign that it is on top of the situation, Nie Wen, an analyst at Hwabao Trust, said Beijing seems to want interbank rates to stay elevated to prod banks into cutting risky loans.
"The tight money market condition is partly a result of the central bank's deliberate push for banks to quicken their deleveraging process," he said.
The central bank did not comment directly on liquidity conditions, but signalled that the market has adequate liquidity by noting the level of excess reserves is "relatively high" by historical standards.
"The central bank has over three consecutive days, through the use of short-term liquidity operations, collectively injected over 300 billion yuan into the market," the PBOC said on its Twitter-like Weibo account on Friday evening.
"At the same time, we remind major commercial banks to reasonably adjust (their) asset and liability structures."
STOCKS, COMMODITIES HIT
The interest-rate swap based on the benchmark seven day repo , considered the best indicator of liquidity conditions, on Friday hovered near the record high of 4.99 percent struck the previous day.
The seven-day repo average rate also rose to close above 8 percent, the highest level since June 21 and within range of the all-time high of 11.6217 percent hit June 20.
The anxiety infected the stock market, where rumours were beginning to swirl of loan defaults by commercial banks. The CSI300 Index, which tracks the largest listed firms in Shanghai and Shenzhen, slid 2.3 percent on the day and lost 5.3 percent for the week, its worst weekly performance since late February.
Demand for commodities was also hit, with spot copper premiums for bonded stocks dropping more than 10 percent this week. Demand for other base metals, including zinc and aluminium, has also weakened due to the cash crunch, trade sources said.
The benchmark seven-day bond repurchase contract began rising on Wednesday, and the rise accelerated when the PBOC refrained from injecting cash into the system during regularly scheduled open market operations on Thursday, the fifth straight session it stayed on the sidelines.
The stresses in the interbank market highlight the difficulty regulators are having in gradually raising the cost of short-term credit to rein in speculative forms of finance without setting off destabilising spikes in adjacent markets.
Analysts say they also reflected poor communication by a central bank accustomed to manipulating the cash supply from behind the scenes.
"We believe the PBOC is faced with some serious challenges with rapid unfolding of bottom-up interest rate liberalization and is confused on whether to target volume or rates (prices) of liquidity," wrote Lu Ting, an economist at Bank of America Merrill Lynch.
"With its limited predictability of flows and its insensitivity to market reactions, the PBOC finds it much more likely than before to make operation mistakes."
Some say further shocks are likely in the future unless the PBOC tweaks its current strategy for attacking the way China borrows, lends and prices capital.
Regulators were startled earlier in 2013 when the "shadow banking" sector began to post explosive growth, driven in particular by high-yielding wealth-management products and more obscure instruments like discounted bankers acceptance notes.
Economists argued that this growth was largely being used for speculative purposes - or alternatively to roll over bad local government debt - and regulators quickly cracked down, both through administrative measures and by increasing the cost of short-term money in the interbank market.
But at the same time it left long-term rates untouched, neither raising official deposit rates nor increasing reserve requirement ratios, both of which would suck long-term base money out of the system - with a likely impact on the ordinary lending that drives healthy economic growth.
So far this has been successful: long-term lending rates remain stable, and Chinese economic indicators have posted encouraging signs of recovery, even while growth in shadow banking has eased.
But although the June cash crunch prompted the PBOC to promise publicly to be more transparent in the way it manages the money supply, so far traders say there has been little follow-through.
"The central bank doesn't need to explain itself to anybody," said a trader at a joint-stock bank in Shanghai.
(Additional reporting by Chen Yixin and Fayen Wong in SHANGHAI and Aileen Wang and Koh Gui Qing in BEIJING; Editing by Chris Gallagher)