China’s top economic official yesterday tried to quell fears surging debt might threaten growth, saying that financial risks are “generally under control” and Beijing can achieve this year’s development targets.
Speaking at a meeting of the World Economic Forum in Dalian, China, Chinese Premier Li Keqiang (李克強) also gave a ringing endorsement of free trade and said China would stick to its commitments to fight climate change.
Li sought to dispel concern about the rapid rise in Chinese debt since the 2008 crisis, which private-sector analysts cite as the biggest potential risk to the world’s second-largest economy.
Moody’s Investors Service on May 25 cut Beijing’s credit rating and the IMF on June 14 urged Beijing to take faster action to get debt under control.
“In the financial sector there are some risks, but we have the ability to uphold the bottom line of no systemic financial risks,” Li said to an audience of Chinese and foreign businesspeople.
China has relied on infusions of credit to prop up economic growth since 2008, causing total nongovernment debt to rise from the equivalent of 170 percent of annual economic output in 2007 to an estimated 260 percent last year.
That unusually high level for a developing country has prompted warnings it could cause a financial crisis or drag on economic growth.
Regulators have cited reducing risk in China’s financial system as a priority this year.
Banks have been told to look closely at borrowers, especially those trying to make acquisitions abroad, to ensure they can manage their debts.
“We have identified the risks in some sectors,” Li said. “The risks are generally under control. We are taking effective measures to address these risks in a timely manner.”
China is “fully capable” of hitting its economic development targets, he said.
The IMF has forecast that the Chinese economy will expand by 6.7 percent this year, down from last year’s 6.9 percent and less than half of 2007’s record 14.2 percent rate.
Li promised to “release greater drivers of dynamism” by opening more of the state-dominated economy to entrepreneurs.
Chinese and foreign companies would be treated equally, he said, although he announced no new initiatives and made no mention of foreign complaints that Beijing is reducing access to its markets for computer security technology, farm-related biotech and other fields.
While some indicators “will inevitably fluctuate,” sound economic growth “will not change,” he said.
The premier also gave a ringing endorsement of free trade and said governments that face political pressure due to strains from globalization should make sure everyone benefits instead of raising barriers to imports.
Despite complaints it is the most closed major economy, China has emerged as a prominent advocate of trade in response to US President Donald Trump’s promises to restrict imports.
Governments need to provide “equal opportunities for participation” and education to help workers adapt, Li said.
“Economic globalization is bringing benefits to all countries,” he said. “It is important to promote growth that benefits all.”
The premier also affirmed Beijing’s pledge to stick to its commitments on climate change, another area where it has split with Washington following Trump’s withdrawal from the Paris climate treaty.
Li promised “tremendous efforts” to control climate change.
“Countering climate change is the common responsibility of the international community,” he said. “China will honor its commitment and implement the measures to deal with climate change.”
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