China will not be able to sustain strong economic growth if the government continues to boost the economy by fiscal spending, according to SG Securities.
'The total contingent liability of China has reached 70 per cent of GDP [gross domestic product and] the fiscal assets cannot last for long,' SG Securities senior economist Steven Xu said.
'I'm not saying the Chinese Government is bankrupt, but certainly there is not much room to manoeuvre economic growth by fiscal expansion.'
He urged the government to encourage private-sector spending to drive economic growth.
One of the key measures to boost private-sector spending was to allow private enterprises, including foreign-owned firms, access to the domestic capital market.
'This can help to dilute the risk of the domestic stock market as it would replace low-quality companies with better quality companies,' he said.
