Economists and regulators who have warned in recent months that staggering levels of bank lending pose a medium- to long-term risk to China’s economy received a fresh injection of worry today. A Shanghai Securities News report is now suggesting that new lending by China’s banks could top US$1.46 trillion this year. Most of that – US$1.02 trillion – has already been lent out amid the suspiciously good performance of stock and property markets. Some people are clearly expecting the stock market to remain buoyant as initial public offerings are resumed (including, it seems, a big railway IPO next year). Perhaps too buoyant: The Shenzhen Stock Exchange is playing it safe by introducing rules that would limit share-price fluctuations of small and medium-sized companies on their first day of trading. Presumably that would help to avoid excessive investor enthusiasm following the lifting of the temporary freeze on new listings, though of course it would also work on the down side.
The International Monetary Fund is also in unfreezing mode as it prepares to discuss its first yearly review of China’s economy since 2007, when Beijing accused the IMF of siding with the US in an attempt to persuade China to strengthen its currency. The IMF has softened its assessments of its members’ exchange rate policies, but even a softer approach isn’t going to please Beijing if reports are to be believed. A draft of the review is said to call the renminbi "significantly undervalued."