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China is wise not to follow the west's example, which is to implement a loose monetary policy when times are good and bad. The western central banks buckle to the banking industry and political pressure to provide liquidity at all times, whenever a bank needs it or at any hint of an interbank lending liquidity crunch.

So why should western banks care about good management? The central bank of China is rightly worried about excess credit. And they seem to be managing it in a sensible way. Their plan is to tighten, then loosen back a bit, tighten, loosen, but the overall trend will be tightening and forcing banks to become more responsible. If they stick to it, they will avoid a crisis. The restructuring may be more difficult, but it would help their long term economic prognosis.