'No systemic risk' from ongoing liquidity crunch

China's liquidity crunch won't pose systemic risks to the world's second-largest economy, but the central bank needs to rethink its policy, said analysts.

Willem Buiter, Citigroup Inc's chief economist, said recent cash tension is a "warning shot" from the People's Bank of China that it means to curb shadow banking activities instead of those of ordinary banks, which pose no systemic risk.

"But if you rely on a crunch (to target shadow banking), you'll succeed but with an economic recession," said Buiter.