China shares plunge amid credit fears

 
Suzie Neuwirth

FEARS of a liquidity crisis sent China’s stocks plummeting today, as the central bank indicated that its credit-tightening policy will continue.

The Shanghai Composite Index fell to 1,849.65, its lowest level since January 2009.

Last week, China’s interbank lending rate – known as Shibor – spiked dramatically. The rise in Shibor indicates banks are only willing to lend to each other at unusually high rates, raising fears of an impending crisis.

An official of the Chinese central bank, the People's Bank of China (PBOC), today denied there were problems in the world's second largeset economy and said that market fluctuations are temporary.