A key Chinese money-market rate matched a two-year high on Wednesday after the central bank drained cash from the banking system, part of an ongoing effort to tame financial risks by squeezing liquidity.

Authorities are facing the tricky task of increasing regulation of risky financial instruments without spooking investors or raising borrowing costs in the real economy. Short-term lending rates have climbed since President Xi Jinping told a politburo meeting last week that financial security was “strategically important” for economic and social development. 

Investors interpreted his remarks as a sign that monetary policy will tighten. The benchmark seven-day repo rate hit a two-year high of 3.18 per cent on Friday on a weighted-average basis and returned to that level on Wednesday, according to the National Interbank Funding Center. Similarly, the overnight Shanghai Interbank Offered Rate (Shibor) hit 2.85 per cent today, its highest level since early April 2015.