Debt issue

China’s credit expansion rate is likely to be faster than GDP growth pace next year, and difficulties will grow for controlling systematic financial risks, a JPMorgan’s economist says.

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.