Bei­jing tar­gets 6.5pc ex­pan­sion this year and plans ‘fire­wall’ against fi­nan­cial risks

New Straits Times - - Business -

CHINA has cut its growth tar­get this year as the world’s sec­ond-largest econ­omy pushes through painful re­forms to ad­dress a rapid build-up in debt, and con­structs a “fire­wall” against fi­nan­cial risks.

China aimed to ex­pand its econ­omy by around 6.5 per cent this year, said Premier Li Ke­qiang at the open­ing of the an­nual meet­ing of Par­lia­ment yes­ter­day. China tar­geted growth of 6.5 to seven per cent last year and ul­ti­mately achieved 6.7 per cent, the slow­est pace in 26 years.

A lend­ing binge and in­creased gov­ern­ment spend­ing have fu­elled wor­ries among China’s top lead­ers about el­e­vated debt lev­els and an over­heat­ing hous­ing mar­ket.

This year’s tar­get for broad money sup­ply growth was cut to around 12 per cent from about 13 per cent for last year, while the gov­ern­ment’s bud­get deficit tar­get was kept un­changed at three per cent of gross do­mes­tic prod­uct (GDP).

China would con­tinue to im­ple­ment a proac­tive fis­cal pol­icy and main­tain a pru­dent mon­e­tary pol­icy, said Li, adding that gov­ern­ment would press on with sup­ply-side re­forms and take steps to con­trol risks and en­sure safety in the fi­nan­cial sec­tor.

“In gen­eral, China’s pol­icy stance has turned to ‘risk con­trol’ and ‘bub­ble de­flat­ing’. This means that the mon­e­tary pol­icy will grad­u­ally tighten,” said Zhou Hao, emerg­ing mar­kets econ­o­mist at Com­merzbank AG in Sin­ga­pore.

The tar­get for con­sumer price in­fla­tion this year was kept un­changed at three per cent.

“At present, over­all, sys­temic risks are un­der con­trol. But we must be fully alert to the build-up of risks,” said Li.

China should have higher lev­els of vig­i­lance con­cern­ing risks from non-per­form­ing as­sets, debt de­faults, shadow bank­ing and In­ter­net fi­nance, he said.

“We will en­sure or­der in the fi­nan­cial sec­tor and build a fire­wall against fi­nan­cial risks,” said Li.

It would steadily push for­ward with de-lever­ag­ing, mainly in the non-fi­nan­cial cor­po­rate sec­tor, Li added.

The fi­nance min­istry pledged in its work re­port re­leased yes­ter­day to clamp down on lo­cal gov­ern­ment debt risk.

China’s debt-to-GDP ra­tio rose to 277 per cent at the end of last year from 254 per cent the pre­vi­ous year, with an in­creas­ing share of new credit be­ing used to pay debt ser­vic­ing costs, ac­cord­ing to a re­cent UBS note.

Chi­nese banks doled out a record 12.65 tril­lion yuan (RM8.17 tril­lion) of loans last year, and re­cent data shows that new yuan loans hit 2.03 tril­lion yuan in Jan­uary, the sec­ond-high­est ever.


Chi­nese Pres­i­dent Xi Jin­ping and Premier Li Ke­qiang (right) at the open­ing of the fifth Ses­sion of the 12th Na­tional Peo­ple’s Congress (NPC) at the Great Hall of the Peo­ple in Bei­jing yes­ter­day.

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