Abstract:To the surprise of many Chinese economists, who are still concerning about the rapid increasing of M2 may induce high inflation rates, the Chinese interbank markets have suffered a severe liquidity strain in the past weeks. This paper analyzed five possible explanations: international conspiracy, seasonal fluctuations, the central bank self-control, shadow banks,and local government debt. And the incentives from validity, reliability, and recognition were measured. Then this paper compared the Chinese political and financial system with that of the west, and predicted the impacts of different control methods to China’s future economy. Finally, it is suggested that the Central Bank of China should seize the opportunity to reduce the Reserve Requirement Ratio（RRR）.