Since China’s four major state-owned banks reported results last week, analysts have been cheering. Profit growth was up and non-performing loan ratios were down. Much has been made about progress in improving underwriting standards. But it would be wise to hold off on the euphoric pronouncements — and to take a closer look at how the banks produced these results.

Most important, there’s little sign of deleveraging. Those banks increased total loans by 10.2 percent in 2016, to $12 trillion. That means lending is still growing much faster than gross domestic product. More worrying, shadow-banking assets — such as wealth-management products — increased by 15 percent, significantly faster than loan growth. The two sectors increasingly seem linked, suggesting that shadow-banking problems may yet become traditional-banking problems. So far, pledges to deleverage have remained just that: pledges.

Further, the two positive trends that analysts identified — a drop in non-performing loans and an increase in profits — are undermined by the underlying data.

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