Increased Interbank Borrowing Causes Concern

By Wu Hongyuran, Zhang Yuzhe and Wang Yuqian

(Beijing) — It’s common for banks to lend to each other, but when taken to extremes, the economy suffers and risks pile up.

This is what worried China’s central bank regulators when they found out that many banks had been using borrowed money to buy other banks’ wealth management products. Rather than going to make loans to companies, funds are flowing through the wealth management departments of several banks, then piling into the bond market, inflating bond prices and fanning speculation.

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