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China's primary money rates rose for the week as a central bank-led net cash injection was offset by seasonal factors keeping liquidity conditions tight. The volume-weighted average rate of the benchmark seven-day repo traded in the interbank market, considered the best indicator of general liquidity in China, was 2.8524 percent on Friday, 1.5 basis points higher than the previous week's closing average rate of 2.8373 percent.
The seven-day repo rate surged to a high of 6.5 percent at one point on Wednesday. Traders said cash conditions suddenly became tight this week, pressured by factors including corporate tax payment and banks' reserve requirement contributions, offseting some of the impact from central bank's liquidity support.
In the open market operations, the People's Bank of China injected a net 110 billion yuan ($16.47 billion) via its reverse bond repurchase agreements for the week, compared with a net drain of 30 billion yuan a week earlier. The central bank also injected 399.5 billion yuan into the financial system via one-year medium-term lending facility (MLF) loans on Tuesday, compared with a maturity of 287.5 billion yuan of such loans on the same day.
Some market players, who found it easy to square their books last week, said they had to borrow money till late into the trading day this week. Market watchers said spikes in money rates this week was mainly linked to corporate tax payment, though cash conditions were also impacted by low excess reserves rates at commercial banks.
Falls in the excess reserves rates have weakened the ability of banks to lend money to others, said Li Qilin, an analyst at Lianxun Securities, suggesting the lowered reserves have forced some banks to hold more cash instead of lending to their peers and other financial institutions. According to Li's forecast the excess reserves rates were at around 1.1-1.2 percent in July, down from an average of 2 percent in 2016.
The Shanghai Interbank Offered Rate (SHIBOR) for same tenor was fixed at 2.8940 percent on Friday, more than 2 basis points from the previous week's close of 2.8725. The one-day or overnight rate also showed an upward movement this week.

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