China’s central bank has quietly raised interest rates and tightened liquidity in recent days, fuelling speculation that the government’s policy focus has shifted from stimulating growth to addressing the risk from rising corporate debt.
But economists say the recent rate rises are primarily aimed at deflating financial asset bubbles, especially in the bond market. Analysts still expect lending to increase rapidly this year, as authorities seek to ensure a strong economy in the run-up to a crucial leadership transition in November.
At the same time, President Xi Jinping wants to ensure the bond bubble does not explode spectacularly in an echo of the 2015 stock market bust.
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