Private Investment Crowded Out as Banks Stick to State-backed Borrowers

(Beijing) – The collapse in private investment growth in China, a phenomenon that has caused significant concern within the central government, has been brought about by a fundamental shift in the dynamics of the country's money supply, a senior official from the country's banking regulator said.

For many years, surging inflows of foreign exchange through the country's current account from a boom in exports were one of the major contributors to the domestic money supply. But as export growth has slowed, those inflows have become far less significant, Yu Xuejun, chairman of the supervisory board for key state-owned financial institutions at the China Banking Regulatory Commission, said on July 16.