A surge in bank lending in China has raised confidence that the government’s efforts to stimulate the economy are already bearing fruit. Shares prices in Shanghai have risen 22% since the start of the year, in part as a response. Yet increased lending will take time to translate into activity on the ground, and much of it may simply end up plugging holes in corporate balance sheets. Meanwhile, export demand continues to weaken and rising unemployment threatens to undermine the strength of consumption, the most resilient part of Chinese spending so far. The incoming data on activity are likely to disappoint.
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