By John Richardson
CHINA'S new local currency lending rose to 703.9 billion Yuan ($111 billion) last month, way ahead of July's 540.1 billion Yuan.
If a you are trader in the Dalian Commodity Exchange's futures contract in linear-low density (LLDPE) you can take this ostensibly encouraging number, and premier Wen Jiabao's speech earlier this week about shoring up growth, as a reason to go long. And sure enough, the Dalian rose by 0.82 percent on Wednesday.
But anybody with a perspective slightly longer than 24 hours needs to be concerned over these comments from Mark Williams and Qinwei Wang of Capital Economics.
"Any optimism should be tempered by the fact that borrowing by firms, as opposed to households, remains weak," they said in a research note.
"The further we dig into today's data, the more sceptical we become that they are particularly encouraging. It is hard to see how the economy can be turned around unless firms decide to invest. There is not yet much sign of that happening on a large scale."
Glenn Maguire of the Sydney-based economics consultancy, Asia Sentry Advisor, also points out in this video that the People's Bank of China has of late been reluctant to further reduce interest rates and bank-reserve requirements because:
*Average industry operating rates in China are now lower than they were during Japan's lost decade, and the "Volcker Recession" in the US, according to IMF data.
*Flooding the economy with more lending, resulting in even more industrial overcapacity, could thus drive China's operating rates even lower. China is already seeking to export its existing deflation.
Wen sought to defend his economic record during his speech earlier this week, along with promising more stimulus.
"His has been basically a caretaker government that was lucky enough to inherit the best growth period in modern Chinese history, but their stimulus package (2008-2010) spent too much money on the wrong things," an academic adviser to the government told the Financial Times.
"The next government will probably face the consequences of their mistakes in the form of an economic crisis and large-scale social unrest," he added.