This Bystander notes that the latest update to the International Monetary Fund’s Global Financial Stability Report holds the following warning for Beijing:
A large policy-induced credit stimulus could be less effective, and certainly less desirable, than in 2008/9. Relative to other [emerging markets], large economies such as Brazil, China, and India have benefited from strong credit growth in recent years, and are at the late stages of the credit cycle. Expanding credit significantly at the current juncture would heighten asset quality concerns and potentially undermine GDP growth and financial stability in the years ahead.
Policy makers in Beijing are aware that resorting to pumping cash into the economy through infrastructure spending will only delay its necessary rebalancing, but the niggling refusal of the economy’s slowdown to bottom out is increasingly forcing their hand against their better judgement.