China is trying to boost the economy by opening its credit lines again, but that credit mainly serves the state-owned companies, while the private sector is suffering, explains financial analyst Victor Shih in Bloomberg.
The readings dash hopes a lending binge in January would flow through to boost activity.
The credit surge “is having an underwhelming impact on the economy,” said Victor Shih, a professor at the University of California at San Diego who studies China’s politics and finance. “The problem may be that investment is increasingly state driven, which only benefits a small handful of state-owned enterprises. The private sector is still suffering from deflationary pressure.”
The central bank said it lowered the RRR rate to guide stable and appropriate growth in credit and create appropriate monetary and financial conditions for supply-side structural reform, according to a statement on its website late Monday.
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