Explainer | 4 weaknesses in China’s economy, from local government finances to poor regulation
- Vice-Premier Liu He and central bank governor Yi Gang are among the outgoing senior officials that have reflected on major risks facing the economy
- Concerns range from the worrying state of local government finances to inadequate regulation of the financial system, including some small banks
Deteriorating local government finances, weak banks and inadequate regulation are among the main risks facing China’s economy, according to senior officials and regulators who have recently published candid assessments following the agenda-setting 20th party congress.
None of the officials have made it onto the list of the Central Committee of the Chinese Communist Party – the party’s top decision-making body – unveiled at the 20th party congress, a sign that they may step down from their roles next year. Their views carry weight nonetheless and come amid growing concern about Beijing’s policy direction.
1. Economic volatility
Liu He, the top economic adviser to President Xi Jinping, has said China’s economy is facing “triple pressure” from shrinking demand, a supply shock, and weakening expectations.
But he has also stressed China would not engage in “flood-like” stimulus, and that the policy focus should be on avoiding economic volatility while aiming for “reasonable” growth.
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“Risk factors in some areas are rising, ageing is accelerating, traditional advantages such as costs of labour are weakening, resource and environmental constraints are tightening, and scientific and technological innovation capabilities are not strong enough,” Liu said.