China's tight liquidity has now been tightened.

At the end of May, Financial Conditions Index (Goldman Sachs) - interbank offered rate, A-class corporate bond yields,

As in the past, the problem is inflation.

Although Chinese Premier Wen Jiabao has recently made an assurance in his newspaper article that domestic policies have been "effective" and that "this year's price increases will be effectively controlled", the June consumer price index (CPI), scheduled for a few days, is expected to be significantly higher than that in May.

Caixin's recent survey of bankers and brokers shows that inflation will reach 6.3% in June, up from 5.5% in May.

This has led to unexpected "exit risk" spasms in other markets around the world.

But as UBS points out, unlike elsewhere, China's yield curve reversal does not necessarily indicate a bleak prospect.

In terms of longer maturities, yields do not account for much of the problem, as businesses and households tend to raise money through bank loans rather than bonds at much higher interest rates.

In terms of shorter maturities, interest rates have all jumped, to a greater extent, by the amount of money in the banking system, which is a function of the deposit reserve ratio, rather than the benchmark price.

However, the obvious policy dilemma shows that China is experiencing the same problems as other countries.

It is easy to provide monetary stimulus, and it is much more difficult to withdraw them.