Commentary: Why China Needs to Cut Interest Rates

Financial data and trade figures for the first three quarters suggest the Chinese mainland’s economic recovery is holding steady on the 5% growth path established late last year. Markets for stocks, bonds and foreign exchange reflect this improved sentiment, which would seem to lessen the need for new monetary easing. But a closer look at the volume and, more importantly, the composition of credit suggests that meeting the government’s annual growth target makes an interest-rate cut more necessary than ever.