There is a really good opinion peice about this topic in the Bloomberg today
China Hides Rampant Inflation in Money Binge: Patrick Chovanec - Bloomberg
The main tool used to boost bank reserves was the annual lending quota imposed by the central bank. Since banks could lend up to the quota, but no more, most had no choice but to hold excess reserves beyond their reserve-requirement ratios. Then last year, the lending quota went out the window. Actual reserve ratios fell from 21 percent to about 17 percent...."
In reality, there is rampant inflation in China. Itís just showing up in asset prices. The new money that was created entered the economy as loans, mainly to fund investment in fixed assets. When it finally reached consumers, they bought tangibles, like property, instead of spending on consumer goods...."
It all has a very familiar ring to it!!