Today yet another sign that Beijing is worried about excessive growth. The China Banking and Regulatory Commission (CBRC) is allegedly considering making subordinated bonds – higher risk, higher yielding instruments – issued by Chinese banks ineligible as capital if held by another bank. At present, such bonds contribute to banks’ capital adequacy ratios, but by removing such bonds from the balance sheet, the new regulation would force banks to hold on to other forms of capital, reducing their ability to grant fresh (bad) loans. This policy, if enacted, seems quite reasonable, as mainland stock and housing markets are once again exhibiting irrational exuberance. Or is it irrational? Alibaba.com says a demand and export recovery in the fourth-quarter is in the offing, and is off to India to form a business-to-business e-commerce joint venture. Property developer Vanke, flush from its 22.5% profit increase in the first half of 2009, is accelerating its housing starts. Meanwhile, Everbright Securities is going to use its US$1.6 billion IPO proceeds to fund expansion. All thanks – or mostly thanks – to government intervention. Keynes – peace be upon Him – must be giggling in his grave.