Chinese economy heading for L-shaped growth, says official

10/05/2016

Beijing construction workerThe growth of the Chinese economy is likely to follow an L-shaped pattern in the coming years as deep-rooted problems persist and new challenges emerge, according to an interview with a senior official in The People’s Daily yesterday. The article rules out the possibility of a quick, strong recovery, and suggested that the economy may tick over at a moderate level for years to come.In a question and answer session, the government figure is quoted as saying excessive credit growth could heighten risks and trigger a financial crisis if not controlled properly.
“Trees cannot grow to the sky. High leverage will inevitably bring about high risks, which could lead to a systemic financial crisis, negative economic growth and even wipe out ordinary people’s savings,” the source said, adding that although growth has been stable and “within expectations,” underlying problems persist, with some emerging problems “bigger than expected.” Deleveraging should be a priority, and the “fantasy” of stimulating the economy through monetary easing should be abandoned. Rising bad loans needed to be met head on rather than kept hidden.
The IMF last month raised its forecast for China’s economic growth in the near term and said a successful rebalancing of the economy was likely. The fund now expects China’s GDP to grow by 6.5% in 2016, up 0.2% from its January forecast.

Source: xinhuanet