China’s new guard sent shockwaves through the credit system last month when the central bank refused to provide the extra liquidity to the money market that had been expected. The two-week credit crunch that ensued resulted in a default and the closure of the bond market to new issues. Was this a deliberate ploy to dissuade bad lending practices and instill banking discipline, or a more fundamental signal that China’s credit-fuelled expansion is to be curtailed?

To read the full Special Economic Analysis by Peter Warburton at LIGNET.com, click here.