Chinafotopress

China’s lending boom since December 2008 has boosted bank loans by RMB 7.4 trillion (USD 1.08 trillion). Many analysts think that an economic boom will follow in the second half of 2009 – they will be disappointed. Much of the lending has not been invested and has flowed into asset markets and many believe that it will lead to a spending boom; creating a bubble to support the economy which at best brings some short-term benefits and more long-term pain. Some of the speculation is actually hurting the Chinese economy. The surge in commodity prices is fueled by China’s demand for speculative inventory. The ......ly that a new growth cycle should start with a distribution of the shares of the listed state-owned enterprises to Chinese households. It would lead to a virtuous cycle lasting a decade.

China’s bank lending surge has led to asset appreciation and buoyant asset markets make many think that the economic problems are fixed – this may be an illusion. The lending surge may have created more problems than it solves. China’s economic problems are structural, they can’t be fixed by stimulus.