BOFIT Viikkokatsaus / BOFIT Weekly Review 2016/19
The authoritative person bluntly stated that there is nothing on the horizon to suggest a revival in growth, but rather that China’s pace of growth would inevitably have to slow. Given the thorny problems that may arise from a real estate bubble, industrial overcapacity, non-performing bank loans and the indebtedness of local governments, the authoritative person said the government needs to keep its focus on reducing indebtedness, moving ahead with reforms and stop whipping up hopes of stimulus relief. The article also stated that stock markets, forex markets and real estate markets need to return to their original purpose and not be manipulated to sustain artificially high growth.
This year, official comments on economy have emphasised the need to hit established growth targets meaning debt-fuelled stimulus and leaving reforms partly on the back burner. Thus, Monday’s mysterious interview is a welcome call for maintaining long-term economic perspective, acknowledging the dangers of debt-driven stimulus and the importance of pursuing reforms. It may also indicate internal differences in the party over economic policy.