All else equal, a reduction of state sponsored lending gets ‘replaced’ by non govt lending to the extent it can be sustained by incomes, collateral values, etc.
And not to forget, likewise, the private sector is necessarily pro cyclical.
The western educated kids at the name mainstream schools may not have brought that home with them…
Surge in Chinese credit raises fears
(FT) Chinese credit issuance surged to a record high in January on the back of a boom in shadow banking. Total new financing last month reached Rmb2.5tn ($400bn). Up more than twofold from the same month last year, eclipsing even the start of 2009 when China unleashed stimulus spending to fight off the global financial crisis. The explosion in financing was only partly driven by banks, which made Rmb1.07tn in loans. The rest of the new credit – 60 per cent of the total – came from corporate bonds, loans by investment companies, direct lending from companies to other companies and banker’s acceptances. Since December regulators have started to tap the brakes on shadow banking – in one important move they restricted the financing sources available to local governments.