"China's Credit Dilemma: Balancing Boosts and Deflation"

China's central bank is facing a dilemma as more credit is flowing into production rather than consumption, exacerbating deflationary forces in the economy. Falling prices are raising real borrowing costs for businesses and households, while deteriorating asset quality is pressuring central bankers to release liquidity into the banking system. The imbalance in credit demand is reducing the effectiveness of monetary policy tools, and analysts urge the government to speed up structural reforms to boost consumption and address the weakening demand relative to production capacity.