The Big Story – Interest rates skyrocket in Communist China amid banks defaulting on loans: The overnight interbank loan rate in Shanghai (known as SHIBOR) zoomed up to 13.4% today, leading Frank Yu of the Epoch Times to note, “investors are more worried about lending to Chinese banks for 24 hours than they are lending to the Greek government for 10 years.” Ouch!

Yu also details why the rate is so high:

On June 6, China EverBright Bank defaulted on an interbank borrowing valued at 6 billion yuan. There are other reported cases of banks unable to pay interbank loans, which undoubtedly have contributed to rising rates. In the past, the PBOC funded Chinese banks through official means as well as off-balance sheet means, but given the recent bank defaults, the PBOC could have indeed tightened the supply of money, both officially and unofficially.

PBOC is the People’s Bank of China – the Communist version of the Federal Reserve.

Like most outside observers – many of who should have known better – the domestic banks likely thought the good times would go on forever. Well, they didn’t.

China’s economic figures from May were shockingly bad. Exports increased only 1 percent from last year, far lower than consensus estimates of 7 percent growth. That’s extremely low considering the probability of fake invoicing by exporters to boost numbers.

Its Producer Price Index last month decreased by 2.9 percent, down for the 15th month in a row. Because China’s economy is largely driven by its manufacturing engine this means that the country is likely suffering from deflation.

Now, if one wishes to prevent deflation, one prints money, but in the current environment (i.e., just about everyone outside of Europe printing enough money to fell whole forests), it only goes so far.

Meanwhile, Ambrose Evans-Pritchard (who noted the rate spike in the Telegraph) has this to say: “Over half of the $2 trillion in wealth management products — described by Fitch as a second hidden second balance sheet of the banks — has to be rolled over every three months.” Uh oh.

If the ChiComs’ mad, corporatist sprint for growth has run its course, what has it gained? Yanzhong Huang (Epoch Times) examines what the regime has earned with its economic policies…and finds ecological devastation, endemic corruption, and mass capital flight. Gordon Chang discusses another result – choking traffic in Beijing – and a spontaneous protest against it by drivers: “they simply turned off their ignitions, locked their doors, and left their vehicles on the road.”

Human rights news: The Communist regime says it will try to slow down – and someday even stop – killing prisoners for their organs. Rabbi Reuven P. Bulka (National Post via Between Heaven and Earth) is less then impressed. Meanwhile, the regime’s appalling record on human trafficking caught the eye of the U.S. State Department (Epoch Times). Hu Jia talks to the Epoch Times about the imprisonment of his friend, filmmaker and fellow dissident Du Bin.

Corruption News: A Chongqing cadre goes on trial for taking bribes, something he had managed to hide until a blackmailer released a sex tape of him (Epoch Times).

Communist escalate surveillance in Tibet: A new crackdown by the regime has locals unhappy (Epoch Times). Tibet was an independent nation until the Communists occupied it in 1950.

Taiwan news: An attempt by the Communist regime to pressure the Philippines out of fishery talks with the island democracy falls flat (Taipei Times). Meanwhile, the U.S. House of Representatives calls on the Obama Administration to help Taiwan get observer status on the International Civil Aviation Organization (Taipei Times).