Fi­nan­cial risks to be fo­cal point

China Daily (Hong Kong) - - TOP NEWS - By WANG YANFEI wangyan­fei@chi­nadaily.com.cn

Fend­ing off fi­nan­cial risks “in some key sec­tors” will re­ceive more at­ten­tion while en­sur­ing eco­nomic growth next year, said a state­ment re­leased af­ter the three-day Cen­tral Eco­nomic Work Con­fer­ence, which ended on Fri­day.

The government will step up ef­forts to pre­vent as­set bub­bles and im­prove reg­u­la­tion, the state­ment said.

Next year’s key chal­lenges in­clude risks i n the prop­erty sec­tor that tend to grow as yearend ap­proaches, and old is­sues that have yet to be re­solved, such as banks’ grow­ing num­ber of bad loans amid credit ex­pan­sion, said Xie Yax­uan, chief econ­o­mist at China Mer­chants Se­cu­ri­ties.

“The good thing is that the government has re­al­ized t he po­ten­tial risks in the prop­erty sec­tor and has taken steps to sta­bi­lize mar­ket ex­pec­ta­tions, ”said Xie, re­fer­ring to the State Coun­cil’s plan, is­sued in Novem­ber, deal­ing with t he re­newal of ex­pir­ing leases on res­i­den­tial land.

Song Yu, chief China econ­o­mist at Mor­gan Stan­ley, said that such poli­cies would help limit spec­u­la­tive be­hav­ior to some ex­tent when res­i­dents found that their prop­erty as­sets would be pro­tected af­ter the leases end in 70 years.

Yan Yue­jin, a se­nior re­searcher at E-house China R&D In­sti­tute, said the pru­dent and neu­tral mone­tary pol­icy pre­scribed in the state­ment would help curb spec­u­la­tive in­vest­ment.

Yan ex­pected the cen­tral government would in­crease the reg­u­la­tion of money flow­ing into the prop­erty sec­tor next year.

“There might be di­verse credit poli­cies cor­re­spond­ing to the dif­fer­ent de­mand for hous­ing pur­chases in dif­fer­ent tiers of cities,” Yan added.

As for re­solv­ing the ac­cu­mu­la­tion of bad loans, Xie said it has to do with how the na­tion pro­gresses next year with its eco­nomic trans­for­ma­tion while im­ple­ment­ing five key tasks, in par­tic­u­lar cut­ting over­ca­pac­ity, where a large pro­por­tion of bad loans have ac­cu­mu­lated.

In Moody’s 2017 out­look for banks in the Asia-Pa­cific, re­leased this week, Chi­nese banks con­tinue to face credit chal­lenges, with a dif­fi­cult op­er­at­ing en­vi­ron­ment.

Bei­jing has grad­u­ally placed more em­pha­sis on prob­lems and pos­si­ble risks in the fi­nan­cial sec­tor this year.

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