In a series of changes this year and last, China's banks were told they would be held responsible for bad loans, and would no longer be forced to dole out funds uncritically to state enterprises and local governments with pet projects. But over the summer, as part of the emergency program to bolster economic activity, banks were directed to expand lending to state companies, again exposing the financial system to trouble as it propped up moribund industries. Ms. Li, the State Council economist, acknowledged that the lending standards of banks had been relaxed, but again said that without economic growth, all else would be lost. Official statistics show that both lending and investment have jumped, but there is no way to sort out how that money is being spent, and how soundly. Much of the extra punch may be seen next year, experts say.
Government officials say that is impractical on such short notice.
They just don't have the training to know how to evaluate risk in lending to private companies. This year's growth rate has become a matter of some contention. Seeking to exude confidence, Zhu, in the best old style of the planned economy, has firmly declared and repeated that growth this year would reach 8 percent. Some critics say that even the 7 percent-plus figures registered in the first nine months do not seem credible, compared with other indicators like falling imports and slower growth in power use and freight transportation, as well as declining prices. Last week even a senior government economist, Lu Benqiang, also of the State Council's Development Research Center, told Chinese journalists that local governments might be fabricating numbers or investing in useless projects simply to increase the growth rate.