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Perhaps a reason to be cheerful?


economies are being squeezed by a credit crunch, Chinese bank lending surged by 21% in the year to January. There are a few other hopeful signs. Are these the first green shoots of spring?

Not necessarily. There are reasons to remain worried about China's immediate prospects. Unfortunately, official statistics are of no help in tracking the path of China's output and demand: the National Bureau of Statistics has decided not to release January figures for industrial production, investment or retail sales because they are distorted by the Chinese new year holiday. In 2008 it fell in February, this year in January, which means that last month had only 17 working days compared with 22 last year. To avoid the statistical noise, January figures for economic activity will be released at the same time as the February ones. Meanwhile, China watchers are having to look elsewhere.

One cheery sign is share prices, which have jumped by 30% since November—although they fell sharply this week. Some optimists have also pounced on the purchasing managers' index, a gauge of manufacturing activity, which increased in January for the second month running.

But the most hopeful sign is the surge in bank lending. Credit controls were lifted in October and banks have been quick to turn on the tap. New loans in January were twice as big as a year earlier—even though the banks were closed during the holiday.

Sceptics note that a large chunk of the increase is accounted for by short-term bills rather than new lending to finance spending. Some “new” loans also represent a shift to the formal banking sector from off-balance sheet vehicles and from the informal loan market which flourished when credit quotas were in place.

But medium- and long-term lending has also increased strongly, suggesting that the government's stimulus package has started to kick in. The central government plans to finance only 30% of the 4 trillion yuan ($585 billion) infrastructure package; banks are expected to provide much of the rest. Some shovel-ready projects are already under way. According to Tim Condon, at ING, transport infrastructure spending in December was already 61% higher than a year earlier.

China can quickly mobilise lending for two reasons. First, the big banks are state-owned and their chairmen appointed by the government, so they tend to follow Beijing's orders. Second, as Tao Wang of UBS argues, domestic debt has fallen relative to GDP in recent years; banks' loan-to-deposit ratio of 65% is low by global standards; and firms, banks and households have relatively clean balance-sheets.

The expectation of increased spending on roads and railways has helped to lift raw-material prices. Chinese prices of steel have risen by 20% since November, and the Baltic Dry Index, a measure of shipping rates and hence the demand for commodities, has more than doubled, although it is still 84% below its 2008 peak. This suggests that firms are rebuilding stocks of raw materials. However, according to Stephen Green, at Standard Chartered, stocks of finished goods are still rising, which will curb production over the next few months. Because of this, the economic numbers are likely to get worse before they get better. The first shoots of spring are often vulnerable to a frost.