Europe's debt crisis could make it more difficult for Chinese exporters to obtain letters of credit (L/Cs) to finance their exports according to a bank economist.

Chief Asia economist at Credit Suisse, Dong Tao, argues that the European debt crisis has caused interbank lending rates to surge, thus making banks reluctant to issue the L/Cs on which China's trade so heavily depends.

Overnight links

The availability of trade finance could easily become a serious problem again soon, Tao told the New York Times.

The economist maintains that L/C availability is closely linked to overnight lending rates between banks. So, when banks find credit hard to come by, they issue fewer L/Cs.

Rates must fall

Stemming the flow of L/Cs is an easy way for banks to conserve cash without violating the terms of other financial obligations, like established lines of credit for big corporations, Tao maintains.

He says interbank lending rates have surged lately and must now come back down very quickly if L/C flows are to be maintained.

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