The banks have been using cheap official funds to finance the vast "shadow banking" market, which Beijing worries is siphoning credit from industry and creating asset-price bubbles.
The People's Bank of China (PBOC) has tried to put an end to this over the past three weeks, declining to inject significant funds into the money markets even as the interest rate for some banks to borrow short-term funds has soared to 25 percent or higher.
This new approach, where you are trying to tighten the funding in the system available for the shadow banking, is much more effective.
Some calm returned on Friday after rumors of some major banks needing emergency funding were quelled. There was also market talk the central bank had guided the biggest state lenders to provide more short-term funds to smaller banks.
China's cabinet this week affirmed its commitment to reducing financial risks and ensuring that credit growth supported the real economy.
