China's central bank has provided emergency funding support to commercial banks and will add more cash on Tuesday, as authorities respond to a spike in cash rates ahead of a major holiday, the bank announced on Monday.
The move by the People's Bank of China (PBOC) comes after the interest rate that banks charge each other for short-term loans spiked in recent days.
Bankers and analysts say the PBOC is attempting to strike a balance by guiding interbank interest rates steadily higher to reduce excess credit growth, while avoiding an acute credit crunch that could spark panic and choke off financing to the real economy.
(Read more: China economy grows 7.7% in fourth quarter)
The central bank also appears to be responding to criticism that it failed to communicate effectively with the market during a severe cash crunch that roiled markets in June. Bankers and analysts criticized the PBOC for remaining largely silent as panic gripped the market and rumors swirled about interbank defaults.