Credit rise likely to ex­ceed GDP growth: Econ­o­mist

China Daily (Canada) - - BUSINESS - By CHEN JIA chen­jia1@chi­nadaily.com.cn

China’s credit ex­pan­sion rate is likely to be faster than the pace of growth for its gross do­mes­tic prod­uct in 2014. Dif­fi­cul­ties will be added in the con­trol of sys­temic fi­nan­cial risks, a JPMor­gan econ­o­mist said on Thurs­day.

To­tal so­cial fi­nanc­ing is pre­dicted to in­crease by 16 per­cent year-on-year in 2014, com­pared with the pos­si­ble 11 per­cent growth of nom­i­nal GDP, sug­gest­ing that the credit-to-GDP ra­tio will con­tinue to rise from its al­most 200 per­cent cur­rently, said Zhu Haibin, chief econ­o­mist in China at the US fi­nan­cial group.

“I am wor­ry­ing the delever­ag­ing progress may not hap­pen very quickly, al­though it was men­tioned in the state­ment of the Cen­tral Eco­nomic Work Con­fer­ence,” Zhu said.

“What we can ex­pect is that pol­i­cy­mak­ers may try to slow down credit ex­pan­sion, but risks in the fi­nan­cial mar­ket can­not be fun­da­men­tally eased.”

Zhu said that in the short term, in­vest­ment will main­tain the “very cru­cial” driv­ing force to China’s eco­nomic growth. “The key is to get a bal­ance be­tween a credit in­crease and struc­tural re­forms.”

JPMor­gan pre­dicted 2014 GDP growth may re­cede to 7.4 per­cent and that for 2013 it is likely to be be­tween 7.6 and 7.7 per­cent.

In­fla­tion may be higher next year, ris­ing to 3.3 per­cent com­pared with about 2.7 per­cent in 2013. But that is still not a se­ri­ous is­sue for the cen­tral bank to worry about, Zhu said.

The re­sults of two sep­a­rate sur­veys on Thurs­day from the Peo­ple’s Bank of China — the coun­try’s cen­tral bank — in­di­cated that Chi­nese bankers and en­trepreneurs are more con­fi­dent about the eco­nomic out­look for next year.

The bankers’ con­fi­dence in­dex rose to 71.3 per­cent dur­ing the past three months, com­pared with 61 per­cent in the third quar­ter, the PBOC said. More than 71 per­cent of bankers ex­pect the coun­try’s mone­tary pol­icy to re­main con­sis­tent in the first quar­ter of 2014.

Mean­while, an in­dex to show en­trepreneurs’ con­fi­dence rose to 65.9 per­cent from 62.8 per­cent three months ear­lier.

One sur­vey also showed that bankers be­lieve the over­all busi­ness cli­mate of the Chi­nese bank­ing sys­tem had im­proved in the fourth quar­ter, sug­gested by an in­dex fig­ure of 77.9 per­cent, up from 76.9 per­cent in the third quar­ter.

An in­dex to show to­tal de­mand for bank lend­ing slipped slightly to 74.4 per­cent from 74.7 per­cent dur­ing the July-to-Septem­ber pe­riod, ac­cord­ing to the cen­tral bank.

“To sup­port rea­son­able eco­nomic growth, it is im­por­tant to en­sure the con­ti­nu­ity and sta­bil­ity of eco­nomic poli­cies,” said the JPMor­gan econ­o­mist Zhu.

In ad­di­tion, he said the macro out­look for 2014 can be set based on the as­sump­tion of a pol­icy shift from sta­bi­liz­ing growth to struc­tural re­form, which will help in the search for a new growth en­gine for the world’s sec­ond­largest econ­omy.

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