The People’s Bank of China (PBOC) continued its tight money approach by skipping open market operations on May 5, pushing up bond yields and triggering a sell-off in stock markets. China’s central bank is under pressure to accelerate “deleveraging” in the financial sector. At the same time, as the PBOC has become less generous in providing cheap funds, signs of financial stress are becoming apparent. The central bank’s decision not to injecting fresh liquidity in the interbank market, on a day when CNY60 billion in reverse repos matured, meant that it was draining funds from the money market in addition to the net CNY805 billion the PBOC had taken from money markets so far this year. Chinese stocks plunged to a three-month low on May 5 while 10-year government bond yields have risen by 90 basis points since October 2016. “The deleveraging and tightening bias is evident, as the economy is still expanding and financial risk controls are being emphasized by the top leadership,” Guo Tianyong, Professor at the Central University of Finance and Economics, said. Beijing is trying to get rid of its “overreliance on debt in the past decade” to reduce risks in the financial system. Such tightening will be long term,” Guo added. The central bank’s gradual shutdown of the credit valve comes as Beijing’s financial watchdogs have enhanced checks on shadow banking activities since late 2016. The PBOC itself is drafting a unified regulation to supervise asset management products. The China Banking Regulatory Commission (CBRC) has initiated a “regulation storm” in the banking industry, telling banks to clean up their balance sheets and to stay away from dodgy deals with non-bank financial institutions, the South China Morning Post reports.