Beijing's "cautious tightening signals" for credit are largely being ignored by banks and at the local level, where attention is focused on maintaining steady economic growth, especially with key Communist Party meetings looming this year, according to Gene Frieda, executive vice president and global strategist for emerging markets at Pacific Investment Management Co.
"The cautious type of tightening usually doesn't work that well for China" as it turns into a "cat-and-mouse game" between regulators and lenders, London-based Frieda told Bloomberg. The People's Bank of China has been relying on more targeted tightening measures. In early February it raised the interest rates charged on open-market operations and on funds lent via its Standing Lending Facility. The central bank hasn't altered its benchmark rate since October 2015, when one-year lending and deposit rates were cut to record lows.