Chinese Banks Begin Hoarding Cash Ahead of Lunar New Year Holiday (FXI)

China stocks are on watch Wednesday morning following amid speculation that banks have started hoarding cash in order to meet an expected spike in demand ahead of the Chinese New Year holidays.

According to market reports, the People's Bank of China is rolling over about RMB269.5 billion (about $43.4 billion) of three-month loans it extended to banks via a medium-term lending facility implemented last October. The PBOC will use other methods aside from open-market operations to bolster its cash supply.

Bloomberg noted that the seven-day repurchase rate rose 27 basis points to 4 percent in Shanghai, which would be the largest gain since December 19th.

The Chinese Lunar New Year Holiday begins on February 18th this year.

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