Yes, they use lending from their state owned banks as a fiscal adjustment, by lending with little concern about getting paid back.
The question is how much is going to domestic demand and how much is going to subsidize exports. Probably mainly the latter.
> On Wed, Feb 11, 2009 at 11:48 PM, EDWARD wrote:
> The government mandates the lending, hence the concerns about loan
> quality and writedowns…but the government is also providing money and
> the rules are not necessarily the same as in the West…they may be
> effective to a point as the net aggregate demand lost from failure in the
> export sector needs to be replaced.
by Kevin Hamlin and Luo Jin
Feb 12 (Bloomberg) — China’s new loans rose by a record in January and money supply expanded more quickly as the government implemented a 4 trillion yuan ($585 billion) stimulus package to revive the world’s third-largest economy.
Banks extended 1.62 trillion yuan ($237 billion) of new local-currency loans and M2, the broadest measure of money supply, climbed 18.8 percent from a year earlier, the fastest pace in more than a year, the People’s Bank of China said today on its Web site.
China’s government has put pressure on banks to boost lending as the government rolls out a stimulus package to reverse the nation’s economic slide. Loan default risk is the biggest single threat to Chinese lenders, which face “a choppy 2009” because the potential for credit losses is rising, Fitch Ratings said last month.