Credit crunch part of Beijing’s broader rebalancing plan

SYDNEY - Last month's credit crunch should be seen as part of Beijing’s effort to restrain runaway credit growth and investment, and encourage consumption spending, according to Australia’s export credit agency, the Export Finance and Insurance Corporation (EFIC). “The late-June jump in China's interbank lending rate, and the refusal of the People’s Bank of China to intervene took markets by surprise”, says EFIC’s Chief Economist, Roger Donnelly. “From targetting inflation at the end of 2011 to promoting growth in 2012, the central bank now appears to have switched again, on concerns about the build-up of bad loans in the shadow banking system. Authorities now seem more tolerant of slower economic growth, and are encouraging more discriminating lending. That worries many Australian businesses.”