China Banks Caught in Deleveraging Pinch Forced to Absorb Costs

Caught between policy makers’ intensifying efforts to raise short-term borrowing costs, and benchmark interest rates that haven’t moved since 2015, Chinese lenders have few options but to absorb much of the higher costs. The gap between the three-month Shanghai Interbank Offered Rate and the one-year lending rate has narrowed to 17 basis points, the least since July 2011.