China has been pouring high-powered money into the economy for years now, buying dollars with newly created cash to keep the yuan from rising.
All that money is now in the banking system and the banks want to lend it.
Raising reserve requirements is a sledgehammer approach to the problem and will not be successful. Banks will find a way around this.
Securitization is a good technique for expanding leverage without putting assets on the bank's balance sheet.
Watch securitization in China.
The same thing is about to happen here in the US.
* * * * * J B K * * * * *
San Francisco
March 10 (Bloomberg) -- China's inflation probably accelerated and exports climbed in February, according to surveys of economists, increasing the likelihood of the central bank raising interest rates from a five-year low.
Consumer prices rose 2.5 percent from a year before, the most in 16 months, according to the median of 29 estimates in a Bloomberg News survey before tomorrow's report. While the gain was likely exaggerated by seasonal factors, economists project the momentum to continue, sending the rate to as high as 4.4 percent during the year, a separate survey showed last week.
Inflation, property speculation and risks for banks are among Premier Wen Jiabao's prime concerns after a record 9.59 trillion yuan ($1.4 trillion) of loans jumpstarted growth last year. Central bank Governor Zhou Xiaochuan said March 6 that while stimulus policies must end "sooner or later," China needs to be cautious in timing an exit because a global recovery "isn't solid."
http://www.bloomberg.com/apps/news?pid=20601087&sid=ajilmEKXv7fM&pos=3
