China’s Pseudo-Monetary Policy

China's recent monetary stimulation has substantially boosted economic. We argue that its efficacy derives from state control over its banking and corporate sectors. Beijing ordered state-owned banks to lend, and they lent. Beijing ordered centrally-controlled state-owned enterprises (SOEs) to invest, and they invested. Our data show much of this investment was highly leveraged purchases of real estate, and rapid land price rises occur where these SOEs are more active buyers. This episode mimics the credit channel for monetary policy, but actually entails internal transfers between arms of the government putting upward pressure on real estate prices