China’s Surging Industrial Loans Aren’t Going to Its Factories
- Credit growth inflated as funds used for speculation: Rhodium
- Inefficient lending could undercut manufacturing push
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As China’s industrial capacity emerged as a key trade issue, a surge in Chinese bank loans to the sector has often been cited as evidence that Beijing is engaging in a renewed manufacturing push that could flood global markets with cheap goods.
But an examination of those loans by researchers at Rhodium Group showed a significant amount of the money didn’t go into manufacturing at all. Instead, the credit growth was inflated by lending to local government-related entities and financial speculation, they found, highlighting inefficiencies holding back the world’s second-largest economy.