China’s central bank says ‘grey rhino’ financial risks could charge in 2019
- Obvious but typically ignored threats could emerge as China ‘gears towards high-quality growth from high-spend expansion’, PBOC says in its annual report
- Document does not name specific risks but includes lengthy analyses of the property sector, and household, corporate and local government debt levels
The “grey rhino” financial risks facing China could resurface next year as the country seeks to deal with growing uncertainty in the global economy and threats to its domestic markets, the central bank has warned.
In its annual China Financial Stability Report published online on Friday, the People’s Bank of China said that there “are still relatively large uncertainties in the global economy and financial markets in 2019”.
“Some grey rhino financial risks could emerge as the Chinese economy is gearing towards high-quality growth from high-spend expansion and structural adjustment,” it said, using the animal-inspired metaphor for the type of risk facing the country that is obvious but typically ignored.
As the world’s largest exporter, China is facing mounting pressure as the trade war with the United States, which started in July, starts to bite.
Even though the impact of the new tariffs on Chinese goods entering the US has yet to fully take effect – mostly because of US importers front-loading their orders before they came into force – China’s economy grew by just 6.5 per cent in the third quarter, it’s slowest rate for a decade.
Meanwhile, the yuan has fallen 6 per cent against US dollar this year and is now teetering on the edge of the psychologically significant mark of seven to the dollar.
As well as the challenges posed by major developed countries moving towards monetary policy normalisation, rising inflation rates and high debt levels, the PBOC report said the global economy was at risk from protectionism such as trade barriers and investment curbs that could undermine global value chains.