China’s top leaders said they will effectively control leverage next year and prevent major risks, stepping up their pledges to ensure stability amid rising debt.
Authorities will aim to give more support to the real economy and promote higher-quality and more efficient development, according to the official Xinhua News Agency, citing a statement late Friday after a Communist Party Politburo meeting led by President Xi Jinping.
Policy makers mapped out three major tasks, placing risk reduction as the top priority. “Leverage should be effectively controlled, the financial sector should better support the real economy, and progress should be made in reducing risks,” the statement said.
Poverty reduction and cutting pollution were listed as the other two missions. The Politburo also stressed social stability, work safety and property reforms, according to the statement.
The meeting of senior leadership is a prelude to the Central Economic Work Conference expected to be held later this month. There, policy makers have historically established priorities and set the tone for monetary and fiscal policies in the coming year, saying at their December 2016 gathering they planned prudent and neutral monetary policy in 2017.
“This sets the tone for the upcoming central economic conference, making deleveraging the top priority for 2018,” Shen Jianguang, chief Asia economist at Mizuho Securities Asia Ltd. in Hong Kong, said by email Friday. He said policy makers are signaling they may tighten monetary policy.
Bloomberg Economics economists Fielding Chen and Tom Orlik estimate China’s total debt will reach 327 percent of gross domestic product by 2022, double the level in 2008.
Ding Shuang, chief economist for Greater China & North Asia at Standard Charted Bank Ltd., said by email Friday that the work conference is likely to be held on Dec. 13, basing his expectation on conference dates in previous years.
He pointed out that this year’s statement omitted the phrase “appropriately expanding aggregate demand,” an expression used in statements of similar meetings in 2015 and 2016. The omission signals more tolerance of slower growth during the deleveraging process, Ding said.
“The government may keep the 2018 growth target at ‘around 6.5 percent,’ without pledging to beat the target,” he said. That could mean that monetary policy will remain neutral with a slight tightening bias.
“Policy makers are reiterating their commitment to structural adjustments, which would amount to a de-facto policy tightening,” said Yao Wei, chief China economist at Societe Generale SA in Paris. “That also means they’re de-emphasizing the numeric growth target.”
Xi has reason to be upbeat this year as economists have ratcheted up full-year 2017 economic growth forecasts and now expect a 6.8 percent expansion that would be the first acceleration in seven years. Data earlier Friday showed exports and imports exceeded economist estimates in November, signaling robust demand in the domestic economy.
A separate item carried by Xinhua late Friday cited Xi saying China should “implement new concepts and focus on new targets in its economic work next year.” It said Xi spoke at a symposium attended by representatives of non-Communist parties and those without party affiliations on Wednesday.
“The essential feature of the economy at the present stage is that it is in a transitional period from a phase of rapid growth to a stage of high-quality development,” Xi said. The shift is imperative to maintain sustainable and healthy growth of the economy and society, he told the gathering. Bloomberg
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