Foreign currency inflow in November still high: PBC

China received an inflow of foreign currency worth about 400 billion yuan ($65.6 billion) into its banking system in November, the central bank said Tuesday, the second-highest inflow of foreign capital into the country in 2013.

By the end of November, the People's Bank of China (PBC), the central bank, and commercial banks purchased foreign exchange totaling 399.3 billion yuan, not far below the level of 449.5 billion yuan purchased in October. The data for December is not yet available.

The data shows there was still a large volume of liquidity flowing into China's banking channels, despite the tight cash situation indicated by climbing interbank lending rates in November and December.

Inflows of foreign currency will accelerate the yuan's appreciation, research institute CrownSpike Hong Kong said in a note on Monday.

The value of the yuan against the US dollar rose by 3 percent in 2013, with the central parity rate approaching 6.1 to the dollar by the end of December, and a further rise is expected in 2014, CrownSpike noted.

"Despite the increased liquidity from foreign capital inflows, the central bank tends to keep a relatively tight money supply," Liu Xiao, a financial analyst at Beijing-based Anbound Consulting, told the Global Times Tuesday.

The central bank has adopted a prudent monetary policy to offset the risk of an asset bubble following the lending spree in 2009-10, which reportedly caused China to have the world's highest broad money supply.

The PBC normally injects money into the market in its regular open market operations, but it suspended two of these sessions on November 7 and 14, 2013.

In mid November, key short-term money market rates including the two-week and one-month Shanghai Interbank Offered Rate increased from the normal level of below 4 percent to above 6 percent.

The cash squeeze intensified the following month, with the rates rising to above 7 percent on December 20.

Another reason for the cash squeeze was the fact that a large part of banks' lending flowed to off-balance sheet shadow banking activities, which are hard for the market regulators to track.

"China's banks are not short of money - they lent too much," Liu said.

Reuters reported Monday that the State Council has issued new rules to strengthen regulation of shadow banking activities.