China’s economy has always been a knotty issue. Assessing what is going on in a real economy with more than 1bn people is not easy. On Thursday, the central bank cut interest rates for the second time in two months. The benchmark lending rate will be lowered by more than the deposit rate and banks have the option of offering loans at a bigger discount to that benchmark. This is about boosting lending and should in principle be good news for investors in commodities.

But the reality is that demand for commodities and machinery this year has not been about end use. China’s copper imports surged by more than half in the first five months, and steel demand was robust. Yet industrial production growth slowed to just 10 per cent. Soya bean imports were strong at the same time as consumption growth moderated. Both trends are due to the fact that anything with monetary value that can be stored has been used as collateral to secure loans. Traders have then fed those funds into the shadow banking system to be lent out over the short term for higher returns.

Construction machinery makers such as Zoomlion and Sany Heavy have felt the impact of these trends. Despite the slowdown in fixed asset investment, their sales are soaring. Cash-strapped customers need machines for collateral to secure loans just to stay afloat. Half of the machines Zoomlion sold (on credit) in the first quarter have never been turned on, Jefferies notes.