BEI­JING

The Pak Banker - - FRONT PAGE -

Down­ward pres­sure on China's econ­omy will per­sist in the sec­ond half of the year as growth in in­fra­struc­ture spend­ing and ex­ports is un­likely to pick up, a se­nior cen­tral bank of­fi­cial was quoted as say­ing.

Chi­nese com­pa­nies are not op­ti­mistic about busi­ness prospects ac­cord­ing to the cen­tral bank's sec­ond-quar­ter sur­vey, Sheng Songcheng, the di­rec­tor of the sta­tis­tics di­vi­sion of the Peo­ple's Bank of China (PBOC), was quoted by the media.

Pres­sured by un­even do­mes­tic and ex­port de­mand, cool­ing in­vest­ment and fac­tory over­ca­pac­ity, China's eco­nomic growth is ex­pected to slow to around 7 per­cent this year, the low­est in a quar­ter of a cen­tury, from 7.4 per­cent in 2014.

A plunge in the coun­try's share mar­kets since mid-June has added to wor­ries about the econ­omy, and re­in­forced ex­pec­ta­tions that pol­i­cy­mak­ers will roll out more sup­port mea­sures in com­ing months to avert a sharper slow­down.

The PBOC has al­ready cut in­ter­est rates four times since Novem­ber and re­peat­edly loos­ened re­stric­tions on bank lend­ing in its most ag­gres­sive stim­u­lus cam­paign since the global fi­nan­cial cri­sis.

Sheng warned about the risks of lo­cal gov­ern­ment debt, say­ing that 2 tril­lion yuan ($322.08 bil­lion) in bond swaps may not be able to fully cover ma­tur­ing debt, ac­cord­ing to the re­port.

Sheng said the PBOC needs to step up the mon­i­tor­ing of lo­cal gov­ern­ment fi­nanc­ing ve­hi­cles given the cur­rent down­turn in prop­erty mar­ket and lim­ited lo­cal gov­ern­ment rev­enues.

Sheng also said he ex­pected sec­ondquar­ter net profit growth for banks to fall, adding that banks' ex­po­sure to risk "has be­come clearer".

But he said the real-es­tate mar­ket could re­bound in the sec­ond half and pro­vide sup­port for the econ­omy.

Sheng said he still ex­pects eco­nomic growth this year of around 7 per­cent, an in­fla­tion tar­get of around 1.5 per­cent and growth of M2 - a broad-based mea­sure of money sup­ply - of around 12 per­cent.

Econ­o­mists at the cen­tral bank said in June they ex­pected growth to pick up mod­estly in the next six months as pre­vi­ous pol­icy eas­ing mea­sures start to take ef­fect and the hous­ing mar­ket sta­bi­lizes.

But other an­a­lysts say that view is un­duly op­ti­mistic, point­ing to huge in­ven­to­ries of un­sold homes and high lo­cal gov­ern­ment debt which is curb­ing their abil­ity to spend on in­fra­struc­ture projects.

Growth at China's man­u­fac­tur­ing com­pa­nies un­ex­pect­edly stalled in July as de­mand at home and abroad weak­ened, an of­fi­cial sur­vey showed on Satur­day.

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