Econ­omy’s growth, risks to be bal­anced

China Daily (Hong Kong) - - FRONT PAGE - By LI XIANG lix­i­ang@chi­nadaily.com.cn

China will seek a bal­ance be­tween sta­ble growth and risk pre­ven­tion in the sec­ond half of the year, a se­nior of­fi­cial said on Thurs­day, in­di­cat­ing that the coun­try is will­ing to tol­er­ate slower growth to push re­forms and curb sys­temic fi­nan­cial risks.

The govern­ment will fo­cus on deep­en­ing sup­ply-side struc­tural re­forms, re­solv­ing risks in lo­cal govern­ment debt, ad­dress­ing chaotic ac­tiv­i­ties in the fi­nan­cial mar­kets and sta­bi­liz­ing the prop­erty mar­ket and pri­vate and for­eign in­vest­ment, ac­cord­ing to Yang Weimin, deputy head of the Of­fice of the Cen­tral Lead­ing Group on Fi­nance and Eco­nomic Af­fairs, China’s top eco­nomic pol­icy-mak­ing body.

Yang said re­duc­ing the high debt ra­tio of State-owned en­ter­prises is one of pol­i­cy­mak­ers’ top pri­or­i­ties, adding that the govern­ment is ca­pa­ble of striking a bal­ance be­tween main­tain­ing growth and cut­ting cor­po­rate lever­age.

“China will not sta­bi­lize growth at the cost of a fur­ther in­crease in eco­nomic lever­age”, he told re­porters at a news con­fer­ence.

“We would rather sac­ri­fice in some other ar­eas. But we will ably han­dle the re­la­tion­ship be­tween sta­ble growth and risk pre­ven­tion,” he added.

Yu Pingkang, chief econ­o­mist at Changjiang Pen­sion In­sur­ance, said that the mes­sage from Yang showed that top pol­i­cy­mak­ers are pre­pared to push nec­es­sary re­forms, in­clud­ing cut­ting SOEs’ in­debt­ed­ness even though it will mean slower growth.

“Re­duc­ing eco­nomic lever­age could be a long and painful process. The best way to do it is to raise SOEs’ pro­duc­tion and op­er­at­ing ef­fi­ciency through mar­ket-ori­ented re­forms,” he said.

Yu said he will not rule out the pos­si­bil­ity of a slight credit loos­en­ing by the pol­i­cy­mak­ers if ma­jor risks emerge dur­ing the eco­nomic delever­ag­ing process.

Wang Zhi­jun, an of­fi­cial at the top eco­nomic pol­i­cy­mak­ing of­fice, said at the news con­fer­ence that China will con­tinue its proac­tive fis­cal pol­icy and pru­dent mon­e­tary pol­icy to main­tain ap­pro­pri­ate credit growth and sta­ble liq­uid­ity.

The coun­try’s bet­ter-than-ex­pected eco­nomic per­for­mance, shown by the strong 6.9 per­cent GDP growth and re­cov­er­ing cor­po­rate prof­its in the first half of the year, has of­fered the govern­ment greater pol­icy lever­age to push re­forms.

In­dus­trial profit grew by 22 per­cent in the first half of this year, much faster than the 6.2 per­cent of the first half of 2016, ac­cord­ing to the Na­tional Bureau of Sta­tis­tics.

Moody’s In­vestors Ser­vice re­vised the Chi­nese bank­ing sys­tem’s out­look on Thurs­day to sta­ble from neg­a­tive — the first change since 2015 — be­cause of the im­proved cor­po­rate profit, solid eco­nomic growth, steady com­mod­ity prices and slower in­crease in cor­po­rate debt.

China will not sta­bi­lize growth at the cost of a fur­ther in­crease in eco­nomic lever­age.” Yang Weimin, deputy head of the Of­fice of the Cen­tral Lead­ing Group on Fi­nance and Eco­nomic Af­fairs

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