Great insight into China bank lending numbers

Reuters set the agenda with an analysis on how a surge in Chinese bank lending might be fuelling a bubble in the stock market. The Feb. 16 story was followed by news Chinese authorities were investigating the lending, a sharp pull-back by the market, and a flurry of analyst reports on the issue. The announcement of the jump in lending was initially seen by politicians and dealers markets as a signal that the economy would soon start recovering. But the data to show it was less positive than it seemed — much of the lending increase was due to a leap in short-term bill financing, which implied that banks and companies remained risk-averse, and that much of the money raised by companies was going into higher-yielding bank deposits or short-term stock market speculation instead of long-term investment. The analysis suggested the central bank might therefore act to cool the bill and stock markets by absorbing money market liquidity. On the following day, the central bank conducted an unexpectedly large drain from the money market and the stock market tumbled 3 percent on news that the banking regulator was investigating the bill financing surge. China International Capital Corp agreed that imbalanced