China Braces for Sub-6% Economic Growth in Key Policy Meetings
Comment of the Day

October 21 2019

Commentary by Eoin Treacy

China Braces for Sub-6% Economic Growth in Key Policy Meetings

This article from Bloomberg news may be of interest to subscribers. Here is a section: 

“They measure the policy scope by looking at the overall debt, by looking at how much risk there is in shadow banking, in the housing sector and in inflation,” Yao said. “Looking at all these things, they judge they actually don’t have much scope from a long-term perspective. So they’re very careful about how to use it and when to use it.”

With few major monetary policy moves in the past month, the Loan Prime Rate, a market gauge of borrowing costs, remained unchanged in October, according to a PBOC release Monday.

In his statement to the IMF’s steering committee at the meetings, Yi said that growth had been stable this year and the “main economic indicators kept within an appropriate range.” While keeping credit growing, the bank should also pay attention to “maintaining a stabilized leverage ratio,” he said.

Yi won support for China’s approach from the IMF, which otherwise has been urging more action to support the global economy. Kenneth Kang, deputy director of the fund’s Asia and Pacific Department, said any support to prop up the Chinese economy should be “contained, calibrated to the shock, it should be temporary in nature and it should be focusing on re-balancing growth down the road.”

Eoin Treacy's view

China’s administration is worried about the debt mountain which has been accrued over the last decade and are therefore reluctant to pull on the traditional levers for growth in the housing and infrastructure sectors. That is weighing on demand for just about all industrial commodities.

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