No sooner said than done: Chinese premier Wen Jiabao had said that there is "increasing" room for stimulus for monetary policy, and he followed words with deeds. After bank lending declined in July, Chinese banks were ordered to lend more money to businesses, and in the first half of August the banks most ready to obey the government invitations – the 'big 4': Industrial and Commercial Bank of China Ltd, China Construction Bank Corp, Bank of China Ltd and Agricultural Bank of China Ltd – extended to customers 70 billion yuan of new loans, against 50 billion in the first fortnight of July.
Of course, it's not enough just to bring the horse water; if he doesn't want to drink, he can't be forced. If loan demand doesn't follow supply, monetary policy can only 'push a string'. If the jump in loans in August is not only due to a stable order that led to more or less fictitious disbursements, monetary easing will soon have to be enriched by other measures: for example, a reduction in the compulsory reserve ratio, which is was lowered in May to 20%, but remains one of the highest in the world.
http://usa.chinadaily.com.cn/business/2012-08/21/content_15690989.htm
