China's interbank borrowing costs spiked to a fresh six-month high on Monday despite an emergency cash injection by the central bank, still market watchers say there is no reason to panic.
The liquidity squeeze is largely driven by seasonal factors, analysts say, including a rush by lenders to shore up funds to meet regulatory requirements and a rise in corporate demand for cash.
"I think it's just a momentary thing...it's a seasonal issue, a rush for cash. Definitely the PBoC [People's Bank of China] needs to pump in more money which it has been doing, but a little bit more is probably necessary," Lorraine Tan, director of equity research at S&P Capital IQ told CNBC Asia's
The seven-day repo rate, a key gauge of short-term liquidity in the banking system, touched 9.8 percent at one stage, up from 8.2 percent on Friday and the highest level since June 20 during the height of a cash crunch earlier this year.