Chinese stocks closed at a level unseen since the global financial crisis in 2009 on Tuesday, as analysts warned a liquidity squeeze was raising the risk of a hard landing for the world\'s second largest economy. For more than two weeks, funds have been in short supply on China\'s interbank market and the interest rates banks charge to lend to each other have surged to record highs. Instead of pumping money into the system, the central People\'s Bank of China (PBoC) has stood firm, on Monday ruling out providing fresh cash and ordering banks to put their financial houses in order. \"If prolonged, this may lead to a credit crunch to the real economy, risking a hard landing scenario in China,\" ANZ Banking Group said in a research report on Tuesday. \"The PBoC has already punished commercial banks for their past excesses. It is time for the central bank to restore confidence in China\'s financial system,\" it said. Analysts said a deliberate policy of inaction by the central bank stemmed from worries over financial risk from loosely regulated wealth management products and the vast \"shadow banking\" system. The liquidity tightness could persist to mid-July, they said. \"The longer this goes on, there\'s a risk that it could feed into the price of credit going into the real economy,\" said Paul Gruenwald, chief economist for the Asia-Pacific region for ratings agency Standard & Poor\'s. \"But for now, we don\'t see a measurable macro (economic) impact,\" he told a conference call with financial analysts and journalists.A central bank official said Tuesday that liquidity risk was \"largely\" under control and the recent volatility in rates was likely to be temporary, Dow Jones Newswires reported. China\'s stock investors have responded poorly to the moves. The benchmark Shanghai Composite Index ended down 0.19 percent on Tuesday at the lowest closing level since January, 2009. The index tumbled as much as 5.79 percent in afternoon trading before rebounding on bargain-hunting. The market closed down 5.30 percent on Monday. \"The situation with tight liquidity conditions has not improved,\" Zhang Yanbing, an analyst at Zheshang Securities, told AFP. \"The market is still anxiously waiting for authorities to improve liquidity conditions and stabilise the stock market,\" he said. But in a stern warning for China\'s 170 million stock investors, the mouthpiece of the ruling Communist Party, the People\'s Daily, warned the government would not play \"wet nurse\". \"The securities regulatory commission is not the stock market\'s \'wet nurse\' nor is the central bank,\" the influential newspaper said in a commentary. \"So-called market-saving and market-boosting acts will not help the stock market, rather they will harm the market,\" it said. The handling of the liquidity squeeze has put the credibility of China\'s new leaders on the line as they try to control financial risks while at the same time keeping economic growth on track. \"The liquidity squeeze is the first real economic test for China\'s new leaders to prove their willingness to overcome tough economic issues not with words, but by their actions,\" said Zhang Zhiwei, a Hong Kong-based economist for Nomura Securities. \"If the new leaders maintain their current approach... it will add downside risk to growth in 2013,\" he said in a research report, though he added it would help make growth more sustainable in the long term. China has set its annual economic growth target at 7.5 percent for all of this year. The country\'s economy, a crucial driver of global growth, expanded 7.8 percent in 2012, its worst performance in 13 years.