China's Central Bank Has $1.3 Trillion Money-Fund Headache
- Savers have escaped the financial repression of the past
- But the shift is seen damping lending growth and raising costs
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China’s ever-growing money market funds pose an increasing problem for the nation’s central bank as policy makers attempt to boost the flow of credit to cushion an economic slowdown.
While the funds have offered savers a handy alternative to risky stocks and once high-flying wealth management products, they’re effectively raising borrowing costs. That’s because, with some 8.6 trillion yuan ($1.3 trillion) according to the Asset Management Association of China, they’re sapping the flow of savings to banks, which in turn are having to pay the funds higher rates when taking their cash as deposits.