China orders state banks to limit interbank lending amid broader finance crackdown

The People’s Bank of China has instructed its major state‑owned banks, including ICBC, China Construction Bank and Bank of China, to curb net lending in the interbank market. The move—delivered as “window guidance”—aims to keep market rates from drifting too far below the policy rate and to tighten excess liquidity that has driven borrowing costs to multi‑year lows.

The restriction is expected to raise short‑term funding costs for smaller banks, local‑government financing vehicles and real‑estate developers that rely on interbank funding, tightening liquidity in China’s broader financial system.

At the same time, Beijing has expanded its enforcement of financial regulations beyond the banking system. Futu Holdings, the Hong‑Kong‑based online broker, was hit with a 1.85 billion‑yuan penalty for offering unlicensed trading services to mainland residents, causing its Nasdaq‑listed shares to tumble more than 25 % and wiping roughly US$1.7 billion from founder Li’s personal fortune.

The crackdown also reaches Hong Kong’s financial sector. Banks, insurers and wealth‑management firms that depend on mainland clients are seeing stricter cross‑border investment rules and penalties on brokers that facilitate offshore share purchases. Shares of firms such as AIA, HSBC, Prudential and Standard Chartered have slipped as concerns grow over reduced capital flows from mainland investors.