Gwynn Guilford in Quartz:
Sneakily but steadily, the Chinese government is pumping torrents of money into its banks. And many trillions of yuan have been flowing into stocks via the interbank lending markets.
Just as interesting, though, is where the cash isn’t flowing. Despite the flood from the central bank, the money geysering forth isn’t making its way into ordinary people’s pockets, their checking accounts, or growth-boosting infrastructure projects. That’s a disquieting hint that China’s $30 trillion in debt is terrorizing its economy far more than the country’s robust 7% GDP growth rate implies.
The first thing to note is the scale of the sums gushing out of the People’s Bank of China. Sources of this largesse include interbank lending, lowering of bank capital requirements—which freed up an estimated 1.5 trillion yuan ($240 billion)—and “innovative liquidity tools” (meaning, backdoor lending to banks).
This money should spur growth. However, Wei Yao, economist at Société Générale, has spotted a curious divergence that suggests it’s not.
More here.