China wary of market risks
> Govt under pressure to balance efforts to tackle debt with need to keep economic growth on steady path
BEIJING: China’s leaders are likely to maintain this year’s growth target of “around 6.5%” in 2018, even as they ratchet up efforts to prevent a destabilising build-up of debt in the world’s second-largest economy, according to policy sources.
Policymakers will be under pressure to balance efforts to tackle debt with the need to keep growth on a steady path, they said. Investor concerns over a crackdown on debt was highlighted last week when a sell-off in bonds spread to the stock market.
Top policymakers are expected to gather in December for the annual Central Economic Work Conference, which investors watch closely for policy priorities for the year ahead, amid a crackdown on riskier banking and investment activities.
“Next year’s growth target could be similar to this year’s,” said a source who is close to policy discussions within the government. “It’s OK as long as we are able to secure growth of 6.5%.”
President Xi Jinping said at the Communist Party Congress in October that China must defuse “major risks” in the economy, and fight poverty and pollution.
But he is also committed to meeting a goal set by the previous administration of doubling gross domestic product in the decade to 2020, to turn China into a “modestly prosperous” nation. That means that growth needs to be around 6.5% in each of the next three years.
The urgency to address debt and property risks was highlighted by a warning on the sidelines of the congress from the central bank chief Zhou Xiaochuan, of the risk of a “Minsky moment” – a reference to a sudden collapse in asset prices after long periods of growth fuelled by debt.
“Growth cannot be too low as we still need to build a modestly prosperous society as outlined at the party congress,” said a second source.
Both sources, who requested anonymity due to the sensitivity of the matter, are involved in internal policy discussions and offer advice to Chinese policymakers but are not part of the final decision-making process.
China’s State Council Information Office, the government’s public relations arm, has not yet responded to a request for comment sent by Reuters on Friday. – Reuters