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Li’s Shock Treatment to China Lenders Evokes Ex-Reformer

The jolt Premier Li Keqiang delivered to China’s financial system emulates a playbook crafted by predecessor Zhu Rongji in the 1990s, inflicting short-term pain in the anticipation of long-term gain.

Li, who took office in March, sent the clearest message yet the past week that China’s new leadership team wants lenders to rein in credit expansion, depriving money markets of liquidity in the biggest squeeze in at least a decade. Next steps may include tightening that sends some smaller financial institutions into bankruptcy, according to analysts at Nomura Holdings Inc.