Chinese official news agency Xinhua released a commentary on last week’s credit meltdown.
“Is China really experiencing a ‘cash crunch’ where liquidity is being squeezed?” asked Xinhua. “This contrast clearly shows that this seemingly ferocious ‘cash crunch’ is in fact structural funding constraints caused by a misallocation of funds. It is not that there is no money, but that the money has not reached the right places,” the commentary said.
The law of unintended consequences may be at full force in this episode.