Meanwhile, the stock market has risen in a move that analysts say has been helped by intervention from big, government-connected investors, a group sometimes known as the National Team. On Friday, Chinese share prices fell to their lowest closing level since early 2016. But this week, the Shanghai stock market has risen almost 2 percent so far.
China has also moved forcefully to reassure common investors. Its banking regulator has begun encouraging the country’s four big asset management companies to aid highly speculative peer-to-peer lending schemes that have been collapsing in recent months, though the details of that help remain unclear. And the government has deferred plans for a more stringent crackdown on various kinds of informal lending, or shadow banking, including off-balance sheet lending by banks.
Other data show how China is trying to pull off a difficult balancing act. Even as Chinese officials push for more lending, a broader measure of borrowing showed the overall flow of fresh credit slowed in July. That suggested lingering effects from the authorities’ previous efforts to crack down on some of the murkier parts of the vast but rickety Chinese financial system.
Tolerating even more borrowing by heavily indebted local governments is a short-term measure that could create long-term problems.
Liu He, a vice premier and close adviser to China’s leader, Xi Jinping, pledged in January that Beijing would bring the country’s debt under control within three years. Beijing had clamped down on some bank lending to state-owned enterprises over the last few years, data from the Bank of International Settlements has shown. Letting local governments borrow more runs counter to that.
“The focus is no longer on deleveraging, but on transferring leverage from one sector to another,” said Zhu Ning, a Tsinghua University economist.
The injections of money by the government into the economy now may offset the withdrawal of money last spring during the deleveraging campaign, but may not be enough to spur an actual boom in the debt-laden Chinese economy, said Rodney Jones, a principal at Wigram Capital Advisors, a Beijing economic research firm.
“I’m really skeptical that stimulus creates a surge of growth like we have seen in the past,” he said. “I think stimulus takes out some of the downside.”