Update | China heading for big economic policy shift, says mystery ‘authoritative’ source in People’s Daily
Article in Communist Party mouthpiece seen as a signal that officials at the very top want to change course from recent debt-fuelled growth
A People’s Daily article published yesterday showed that China’s leadership is trying to make a grand shift in the nation’s economic policies in a bid to say goodbye to debt fuelled growth.
In a sign of distaste for the credit-pumped growth in the past couple of months, the Communist Party mouthpiece cited an unidentified “authoritative” figure as saying that boosting growth by increasing leverage was like “growing a tree in the air” and that a high leverage ratio could lead to a financial crisis.
Economic growth was set to enter a so-called L-shaped trajectory for a few years and it was unrealistic to expect any rebound in the world’s second largest economy, according to the article.
“It’s a policy stance statement that China will stop its practices in the first quarter of bolstering growth by credit injection,” Tao Dong, chief economist for nonJapan Asia at Credit Suisse in Hong Kong, said.
“It’s clear-minded to see high leverage as a source of risks, and I applaud such a statement.”