China cash squeeze worsens despite central bank efforts China's cash squeeze worsened on Monday despite the central bank's repeated attempts to calm financial markets with emergency money injections. The seven-day bond repurchase rate, an important gauge of short-term liquidity, climbed to 8.8 per cent in early trading, up about 60 basis points from its average on Friday, a signal that banks are still hoarding cash. The continued tightening of monetary conditions in the face of the central bank's liquidity injections raises the spectre of a repeat of the Chinese cash crunch earlier this year that exposed fragility in the world's second-biggest economy and spooked global investors. Traders and analysts have praised the central bank's more aggressive response to the current liquidity squeeze, but concerns are mounting as its actions appear to have been largely ineffectual so far. Late on Friday the People's Bank of China announced it had conducted Rmb300bn ($49bn) of "short-term liquidity operations," providing targeted doses of credit to cash-strapped banks. It has indicated that these injections will continue for "qualified lenders" after rumours spread last week that some institutions had missed payments to each other in the interbank market. Nevertheless, the volume-weighted trading average of the seven-day repo hit 8.84 per cent on Monday, its highest since the cash crunch in late June, according to Reuters. There was at least some relief in equity markets, with the Shanghai Composite, the country's main index, rising 0.4 per cent in the morning session. Through Friday it had fallen on nine straight days, its longest losing streak in nearly two decades. Liquidity is traditionally tight in China at the end of the year as corporate demand for cash rises and banks rush to book deposits on their balance sheets to meet regulatory requirements. The competition for deposits has been compounded by the growing array of bank-like institutions that offer higher-yielding alternatives for savers. Moreover, analysts believe the central bank overestimated government spending in the final weeks of the year, leading it to believe that liquidity would be more ample than it has turned out to be. As interbank rates have risen, the central bank has tried to persuade investors that monetary conditions are already loose enough by pointing to the Rmb1.5tn of excess reserves in the banking system. It has nudged banks sitting on unused cash to step forward to ease the money-market gridlock. This effort at persuasion continued on Monday. In its top story, the Shanghai Securities News, an official financial newspaper, argued that the cash crunch was more imaginary than real: "The "cash crunch" is absolutely not a shortage of money. Rather, it results from the distorted funding structure of banks. Chinese propaganda authorities have also ordered local media to tone down their coverage of the cash crunch, in a sign of their worries about the financial turmoil.