The WSJ reports,"China's central bank is turning into a policy heavyweight in a battle among the country's top economic authorities over how to fuel growth without piling on excessive debt.
The government has sought to portray a united front on its "mini-stimulus" measures, or small adjustments to monetary policy to bolster growth.
Behind the scenes, however, China's biggest economic agencies—the People's Bank of China, the Ministry of Finance, the state planning commission and other financial regulators—have fought over whether more should be done to bolster growth, such as cutting interest rates for the first time in two years, according to officials familiar with the government's deliberations.
China's gross domestic product growth has fallen below its target of 7.5% for the year, deepening concerns about the strength of the world's No. 2 economy.
In the latest battle, the country's top banking regulator on Friday said it would ease rules to make it easier for banks to lend only to small companies. That followed a decision a week earlier by the State Council, the government's top decision-making body, to target more bank funding for small businesses and farms.
The central bank fended off calls to cut interest rates, at least for now, the people familiar with the situation said, by arguing that a rush of new credit could add to already ballooning debt and funnel money to the real-estate sector, which is struggling with a housing glut that is dragging down growth and threatening to trigger loan defaults.
"Theoretically, conditions are ripe for a rate cut as inflation is not a concern right now," a central bank official said. "But it wouldn't be as effective as we would want it to be" because it could worsen other problems in the economy".
