Chinese regulators have issued guidance to some banks prohibiting bill rediscounting at rates below 0.5 percent. Against a backdrop of weak funding demand, banks have been channeling funds into the bill market to meet lending targets or deploy surplus liquidity, causing bill rediscount rates to plunge—it was not uncommon for them to drop to 0.01 percent at month-end. According to people familiar with the matter, the rapid and excessive decline in rates driven by heavy bank buying undermined control over market expectations, which is behind the regulatory tightening. It has also been pointed out that authorities may have been concerned that sharp swings in bill rates were being exploited for speculation about credit growth.