China is aggressively stimulating its economy through the banking sector, a source of previous problems and concerns. It appears to be working. Bloomberg:

The People’s Bank of China “will implement moderately loose monetary policy and maintain the continuity and stability of policy,” the central bank said on its Web site today. It pledged “ample liquidity” to “ensure money supply and loan growth meet economic development needs.”…

New loans rose to 1.89 trillion yuan ($277 billion) in March, the central bank said yesterday. M2, the broadest measure of money supply, grew 25.5 percent, the most since Bloomberg began compiling data in 1998 and more than the 21.5 percent median estimate in a survey of 12 economists. China’s industrial production climbed 8.3 percent from a year earlier in March and consumer demand grew “relatively rapidly” in the first quarter, adding to signs that the government’s 4 trillion yuan stimulus plan is taking effect…

China’s banks, which are mostly state-owned, have already met the bulk of the government’s target of at least 5 trillion yuan of new loans this year. Lending may top that level by as much as 3 trillion yuan…Commercial banks’ bad-loan ratio was 2.45 percent at the end of 2008, according to the regulator. The ratio was more than 20 percent in 2003, before the government completed a cleanup of the banking system that cost more $500 billion.

The stimulus has had an effect on the market, which has been recovering recently from its dramatic plunge from the stratospheric Roaring Twenties level of 2007.

It seems likely that China’s economy is recovering. One of the things that is unknown at this point is whether China, which has recently been calling for a new international reserve currency, has any intention of supporting the Obama administration’s dysfunctional spending priorities and plans. Some signs point to “no.” The NYT has some details:

Reversing its role as the world’s fastest-growing buyer of United States Treasuries and other foreign bonds, the Chinese government actually sold bonds heavily in January and February before resuming purchases in March, according to data released during the weekend by China’s central bank. China’s foreign reserves grew in the first quarter of this year at the slowest pace in nearly eight years, edging up $7.7 billion, compared with a record increase of $153.9 billion in the same quarter last year.

China has lent vast sums to the United States — roughly two-thirds of the central bank’s $1.95 trillion in foreign reserves are believed to be in American securities. But the Chinese government now finances a dwindling percentage of new American mortgages and government borrowing. In the last two months, Premier Wen Jiabao and other Chinese officials have expressed growing nervousness about their country’s huge exposure to America’s financial well-being.

It’s sad to say, but America appears to be on the decline, with its screwy budget priorities and wild, unsupportable entitlement programs. China appears to be headed in a very different direction — this story about the CEO of BYD, Wang Chuan-Fu, makes China’s development seem a little like that of the US a century or more ago.

This entry was posted on Wednesday, April 15th, 2009 at 12:45 am and is filed under business, China, Democrats, General, Republicans, Science. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.