Ex­perts: Na­tion’s debt risks un­der con­trol

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

China’s debt risks are un­der con­trol as en­hanced su­per­vi­sion has taken ef­fect, but reg­u­la­tory bod­ies need to en­hance co­or­di­na­tion to tackle risk points, an econ­o­mist with a gov­ern­ment think tank said on Tues­day.

“The over­all debt risks re­main un­der con­trol, but reg­u­la­tory bod­ies need to en­hance co­or­di­na­tion to deal with risks emerged in sec­tors such as off-bal­ance sheet ac­tiv­i­ties,” said Li Yang, di­rec­tor­gen­eral of the Na­tional In­sti­tu­tion for Fi­nance and Devel­op­ment with the Chi­nese Academy of So­cial Sciences.

Risks have been piled up in re­cent years in sec­tors such as real es­tate, ac­cord­ing to Li.

Cen­tral gov­ern­ment debt in 2016 stayed the same com­pared to the pre­vi­ous year, while lo­cal gov­ern­ment and house­hold debt went up by 9 per­cent­age points and 5 per­cent­age points, re­spec­tively, com­pared to 2015, ac­cord­ing to the re­port by the Na­tional In­sti­tu­tion for Fi­nance and Devel­op­ment at the Chi­nese Academy of So­cial Sciences.

Echo­ing his re­marks, Luo Ping, a se­nior re­searcher at the in­sti­tute, said the cur­rent su­per­vi­sion mech­a­nism needs to be im­proved.

He sug­gested that the top fi­nan­cial reg­u­la­tory au­thor­i­ties should be able to es­tab­lish new de­part­ments to deal with the risks in­volved in fi­nan­cial prod­ucts.

“The good news is that the pol­i­cy­mak­ers have be­come aware of the risks,” said Luo.

Ear­lier this month, the State Coun­cil de­cided to es­tab­lish a com­mit­tee over­see­ing fi­nan­cial sta­bil­ity and devel­op­ment.

“The step sig­nals that the cen­tral gov­ern­ment has el­e­vated the im­por­tance of pre­vent­ing risks to the na­tional level,” said Luo.

Ef­forts to re­duce risks such as through lower ex­ces­sive credit started to bear fruits, he said.

Al­though China’s debt to GDP ra­tio con­tin­ued to in­crease in 2016, it grew at slower pace, the re­port said.

Delever­ag­ing contributed to the slower growth of debt in 2016, ac­cord­ing to the re­port.

Debt over GDP in the fi­nan­cial sec­tor was 97 per­cent in 2016, up only 9 per­cent­age points com­pared to 2015, ac­cord­ing to the re­port.

Debt over GDP in­creased by 11 per­cent­age points from 2014 to 2015, the re­port said.

By the end of 2016, money in­vested in fi­nan­cial prod­ucts hit 29 tril­lion yuan ($4.3 tril­lion), among which 70 per­cent was in­vested in non-fi­nan­cial eco­nomic ac­tiv­i­ties, ac­cord­ing to the re­port.

Liu Xiaochun, pres­i­dent of Hangzhou-based CZBank, said the com­mer­cial banks have grad­u­ally switched from pur­su­ing high in­vest­ment re­turns from fi­nan­cial prod­ucts.

“How to guide money to sup­port the non-fi­nan­cial sec­tor be­comes one of our ma­jor tasks,” he said.

The debt of State-owned en­ter­prises went back to rel­a­tively the same level as in 2007, the year be­fore the global fi­nan­cial cri­sis, as the cen­tral gov­ern­ment’s ef­forts to en­cour­age cut­ting lever­age started to bear fruit, ac­cord­ing to the re­port.

Li Yang, di­rec­tor-gen­eral of the Na­tional In­sti­tu­tion for Fi­nance and Devel­op­ment with the Chi­nese Academy of So­cial Sciences

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