China is tightening liquidity

January 7th, 2007

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Today, this article caught our eye: China Raises Bank Reserve Requirement to Cool Lending (Update3). China is tightening liquidity in its financial system and the implication is that sooner or later, if the tightening trend continues, the stock bubble merrymaking will eventually ends (see Caution: new high in Shanghai Stock Exchange Composite Index). It may not lead to a crash, but at the least, the upward momentum will have to end.

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