Sporadic outbreaks of the coronavirus, including the nasty Delta strain – China’s major export hub, Guandong province, was hit by an outbreak last month – have added to the opacity of the authorities’ motivations.

The bad debts that have hit the big end of China’s property development sector hard may be impacting its banks where, after being urged to lend more last year to counter the effects of the pandemic, their willingness or ability to extend credit, particularly to small and medium-sized businesses, appears to have been reduced significantly this year.

For the rest of the world, an earlier and faster slowdown in China’s growth rate than expected provides an ominous warning of what might be to come.

The additional liquidity and capital unlocked by the change to the reserve requirements could reflect an awareness that the crackdown on leverage might be having some unintended consequences.

It might also be a recognition…

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