An intriguing new avenue of discussion is opening up in the three-year-old Strategic & Economic Dialogue between the US and China, which starts on Monday in Washington. As China’s currency is appreciating and its trade surplus is falling, two of the traditional flashpoints have dimmed. Next on America’s agenda: China’s habit of channelling cheap credit to its huge state-owned enterprises, fuelling “trade tension”.

That is a smart move. Beijing is currently engaged in one of its periodic rounds of SOE “modernisation”, trying to cut down the list of 125, while limiting the state’s direct oversight. But no one should expect that this will seriously affect the supply of liquidity from the state-run banking sector. Banks, after all, are naturally inclined to lend to the safest credits – and those happen to be SOEs. As Credit Suisse notes, three big state-dominated sub-sectors – banks, capital goods and energy – accounted for an aggregate 80 per cent of listed companies’ earnings growth in the first quarter. This cycle of dependency ensures that the SOEs remain formidable competitors overseas, while penalising the domestic, non-state sector. As China has tightened monetary policy, many small and medium-sized companies and privately owned exporters have been dropped from lending lists.

But where are the incentives to redress the balance? As every SOE is a cell of the party state economy, distinctions between suppliers and customers are blurred. Guo Shuqing, the chairman of China Construction Bank, for example, used to be deputy governor of Guizhou province; the chairman of Sinopec, the petrochemical company (a big client of CCB) has just become governor of Fujian province. While China’s big banks do not class loans to SOEs as related party transactions, it is hard to imagine one aspiring technocrat refusing a loan to another, or pricing it punitively. The US knows that it is striking a nerve.