Curb­ing lever­age risk bears fruit, bank head says

China Daily (Hong Kong) - - TOP NEWS - By CHEN JIA chen­jia@chi­nadaily.com.cm

China’s ef­forts to curb fi­nan­cial risks are bear­ing some fruit as the over­all lever­age ra­tio has been con­trolled at a sta­ble level, said Yi Gang, cen­tral bank gov­er­nor.

The coun­try’s econ­omy is sta­bi­liz­ing, and the an­nual GDP growth tar­get of around 6.5 per­cent, set early this year, will be achieved, Yi said in a Caixin mag­a­zine ar­ti­cle pub­lished on its web­site on Thurs­day. Yi made the com­ments dur­ing the 2018 An­nual Meet­ings of In­ter­na­tional Mon­e­tary Fund and World Bank in Bali, In­done­sia.

“Over many years, we have talked about delever­ag­ing. Now the lever­age level has been sta­bi­lized, which is a sig­nif­i­cant change,” Yi said.

The lever­age ra­tio for State-owned en­ter­prises has fallen con­tin­u­ally, and lo­cal gov­ern­ment debt is un­der con­trol, he said, adding that the struc­ture of the econ­omy also is im­prov­ing amid sta­bi­liza­tion of the lever­age level. “All this in­di­cates that China has en­tered a stage of high­qual­ity de­vel­op­ment.”

Re­cent re­search of the Na­tional Fi­nance and De­vel­op­ment Lab, part of the Chi­nese Acad­emy of So­cial Sciences, shows that in the first half of the year, the lever­age ra­tio for the coun­try’s non­fi­nan­cial cor­po­ra­tions de­clined by 0.6 per­cent­age points.

“We ex­pect the struc­tural delever­ag­ing process to con­tinue,” said Zhang Xiao­jing, deputy direc­tor of the lab.

Yi said the money sup­ply and credit growth pace are at a proper level, fo­cus­ing on sup­port­ing the real econ­omy and small and mi­cro com­pa­nies. He said the cen­tral bank mainly con­sid­ers the do­mes­tic eco­nomic sit­u­a­tion when mak­ing mon­e­tary pol­icy.

An­a­lysts said Yi’s com­ments may help ease fi­nan­cial mar­ket panic as a sharp sell­off on Wall Street shook global eq­uity mar­kets, pulling down Asian and Eu­ro­pean stocks on Thurs­day.

In Bali on Thurs­day, Yi ex­changed views on eco­nomic and fi­nan­cial is­sues with US Trea­sury Sec­re­tary Steven Mnuchin and Jerome Pow­ell, chair­man of the US Fed­eral Re­serve, ac­cord­ing to a state­ment of the cen­tral bank.

The IMF is­sued a pol­icy pa­per on Wed­nes­day call­ing for pol­icy co­op­er­a­tion to boost in­clu­sive growth by mod­ern­iz­ing the trade sys­tem, re­duc­ing ex­cess global im­bal­ances, im­prov­ing debt dy­nam­ics and lever­ag­ing tech­nol­ogy.

“Now is the time for pol­i­cy­mak­ers to act to re­build pol­icy space, strengthen re­silience, and im­ple­ment struc­tural re­forms for the ben­e­fit of all. Wan­ing sup­port for mul­ti­lat­er­al­ism is fu­el­ing pol­icy un­cer­tainty,” the IMF pa­per said.

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