China can’t fix its financial problems by debt cutting alone, economists say
Overheating property markets and the ballooning financial services sector are symptoms of structural imbalances that need addressing
The push for real economic reforms remains a key challenge facing President Xi Jinping during his second term, as structural improvements beyond debt reduction are needed to contain China’s financial risks, chief economists of China’s top banks said in Beijing on Thursday.
The recent top-down deleveraging campaign to reduce debt “is necessary”, said Ren Zeping, chief economist at Founder Securities, during a financial forum as part of the 20th Beijing International High-Tech Expo.
“However, if China does not improve the economic return in the real economy as soon as possible, the capital will continue to flow to the property and financial sectors, triggering more risks,” he said.
Zhang Ming, chief economist with Pingan Securities shared Ren’s view, saying reform in the real economy is “severely lagging”.
Low efficiency and low returns in the real economy is pushing liquidity into the financial sector, adding to risks, Zhang said.
“The first three years into the second term of each Chinese leadership has been a window to push forward significant reforms,” Zhang said.