LELAND R. MILLER / CRAIG CHARNEY
The spike in China's interbank lending rates caught many investors by surprise and added to the market turmoil over the last week. But for those paying close attention to the mainland credit markets, this was no bolt from the blue. In fact these problems were foreseeable and are likely to continue.
Over the past two weeks, the People's Bank of China has mostly withheld funding from the financial system, sending the Shanghai Interbank Offer Rate (Shibor)岸the benchmark rate Chinese banks use to lend to each other岸to record highs. Yet the credit floodgates weren't suddenly closed in China: The environment has actually been constrained all year long.
For three quarters, our company's surveys of Chinese firms have shown corporate borrowing weakening, interest rates rising and shadow banking shrinking. But because of lagging and inaccurate official data, there have been lengthy lags in market perceptions of loosening and tightening.
Many factors contributed to recent Shibor spikes, including the timing of tax payments, a public holiday, new data showing slowing inflows, and fears of reduced quantitative easing by the U.S. Federal Reserve. Yet the larger reason China is seeing spiking rates and confusion over the government response is that official data misrepresent China's credit environment. The government's goal is and will be to tighten credit, and it has been that way for longer than most people realize.
A look at independently collected credit data paints a very different picture of China's credit environment than the headline numbers Beijing has long deemed sufficient.
Consider widespread misperceptions over the expansion of shadow finance. From January to May, official data indicated that 'total social finance' in China's economy (principally shadow banking) expanded dramatically, leaving the market convinced that a tidal wave of credit was arriving. Our quarterly national Chinese business surveys, by contrast, have shown that the proportion of Chinese firms borrowing from shadow lenders was identical in the first and second quarters of this year (and down nearly half from a year ago).
Far from seeing firms soaked in liquidity from any source, our surveys have seen drops each quarter in realized company borrowing, from 43% a year ago to a shockingly low 30% this quarter. Average interest rates paid by firms have steadily risen to 7.1% since bottoming during the third quarter of last year at 5.96%.
In other words, while the market was obsessing over the threat of too much liquidity, firms found loans increasingly difficult and expensive to obtain. This kind of incongruity between the actual credit environment and the market's perception of it made some sort of shock almost inevitable岸something our data highlighted back in March.
Bizarre divergences in credit responses between bankers and companies should have also sounded the alarm. In the current quarter, our survey shows that bankers report stable interest rates and more lending to firms, but firms are reporting higher rates paid and much less borrowing than ever before. This company-bank divergence is concrete evidence of lack of intermediation岸which should have led analysts to aggressively question banker reports of abundant liquidity.
Banks have certainly made low-cost credit available, but to whom? Larger, state- connected firms needing to roll-over debt, according to our data. But for most firms seeking capital, conditions are increasingly tough.
The policy environment for these spikes was also much more apparent than most investors recognized. The central bank has tightened for months now. In March, after a 17-month hiatus, it resumed issuing three-month bills (as opposed to shorter-dated, more flexible instruments). Then, in the run-up to the recent holiday, it chose not to inject cash via reverse repos or short-term liquidity operations, despite expectations it would do so. Last week it doubled down, selling two billion yuan of three-month bills not once but twice. While those issuances were negligible in size, they were a clear signal that China's new leadership has no intention of rushing to the distress of what they believe are long-pampered banks.
This policy shift could have been recognized in March, but the warnings went unheeded because markets focused on fears of shadow-banking excesses based on unreliable official data.
The overall tightening in credit this year, coupled with the market's mistaken belief that large and growing aggregate figures for total social finance would backstop credit growth, created an expectations bubble that is proving every bit as dangerous as an actual credit bubble. In this context, a spike in call rates is hardly surprising. The market is simply much shallower than the aggregate numbers indicate.
Investors would do well to ignore official headline numbers and concentrate instead on reports from businesses that have long been signaling distress over tightening credit. If they wait for official evidence of this, they will likely get it only after further market jolts.
Mr. Miller is president and Mr. Charney is research director of China Beige Book International, which publishes a quarterly economic survey of over 2,000 Chinese firms.
LELAND R. MILLER / CRAIG CHARNEY
（Miller和Charney分别是China Beige Book International的总裁和研究部门主管。该公司每季度会发布一份针对超过2,000家中国公司的经济调查报告。）