Frankly speaking, it's a secret now. The China Banking Regulatory Commission (CBRC) is inspecting it; but one issue is clear: most of the newly increased credit, if not all, entered the SOEs (state-owned enterprises) and government supported programs. The private sector gets rather a small part of it.

It's a dangerous signal. Why say dangerous? Firstly, 4.58 trillion credit equals 90% of the newly increased credit target in 2009. To increase so much credit in such a short time, it's almost impossible to inspect each loan prudently, as a result, 3-5 years later, there would be a lot of non-performing loans on the balance sheet of China's financial institutions, the amount would be hundreds billions. It's a disaster to China's banking system.

Secondly, the Jacobinical credit would supply too much money to the economic system. For domestic consumers would not consume much as for now, the money would only like “ice”; One day the economy reverses, the money would be changed to “water”, which brings too much liquidity to the economy. Then, the inflation occurs.

Thirdly, for the credit flows to the SOEs and government supported programs, the private sector would be “squeezed out”. And the SOEs have a quite low efficiency in investment.

As a result, the 4.58 trillion credit brings widespread concerns on the credit quality. What's worse, the credit rescued the department that have a low efficiency or have bubbles. The credit rescue would slow the process of normal economic adjustment. For example, among the 4.58 trillion, hundreds of billions has entered the real estate market. In China, real estate has too much bubbles, the industry needs a deep adjustment. However, the bank gave loans to these real estate companies, make the adjustment slower.