China should not seek high growth as financial risks mount, warns government official
China should focus less on rapid economic growth and more on the quality of its economy, given the dangers from already accumulating financial risks, a senior Chinese Communist Party official warned on Saturday.
In the past 30 years, China had created a miracle of high-speed growth, Yang Weimin, deputy director of the Office of the Central Leading Group on Financial and Economic Affairs, said at the annual China Development Forum in Beijing.
“Over the next 30 years, China can create another miracle of high-quality growth,” he said.
An obsession with beating growth targets has led many local government officials to develop their economies at a breakneck pace, often to the detriment of the environment and sometimes their finances.
President Xi Jinping said China should focus on the quality of its growth last October at the opening of the twice-a-decade Communist Party congress.
Economists say better-than-expected growth in 2017, when the country handily beat its target of about 6.5 per cent, gives Beijing room to press ahead with its campaign to reduce risks in the country’s financial system.
But economists warn that it remains to be seen whether China will fall back on the old growth engines of credit-fuelled investment and policy stimulus, plus wobble on its commitment to stabilise leverage ratios.
Li Yang, an influential economist at the Chinese Academy of Social Sciences, a top government think tank, told the forum China’s macro leverage ratio rose 2.5 percentage points in 2017, but the structure of the leverage has improved.
While the household debt ratio rose 4.2 percentage points to 50 per cent, the debt ratio of non-financial firms fell 2.4 percentage points to 152.7 per cent, Li said.
Stephen Roach, a Yale University economist, said China’s economy still faced challenges and imbalances including low private consumption and slow reforms of state-owned firms.
“We are here to celebrate the miracle, but we cannot just assume that because you pulled off this great miracle in the past, you can just push the button and do it again,” Roach, a former chief economist at Morgan Stanley, told the forum.
Roach, a well-regarded China expert, said he was also concerned about the deterioration in the trade relationship between the United States and China, and warned against serious policy blunders from the Trump administration.
“China cannot afford to ignore the risks that it faces in the external environment, especially with respect to its major partner – the United States,” he said.