Handling tests well may raise China GDP
Print Edition
Shadow credit, a liquidity crunch and local government debt will be major challenges facing China this year, UBS chief China economist Wang Tao said in Shanghai yesterday.
Wang said managing the three major challenges properly will help China’s gross domestic product expand 7.8 percent this year from an estimated growth of 7.6 percent last year.
“The major topic for this year is to keep balance between growth and reform,” Wang said on the sidelines of the UBS China Conference.
“There are risks in shadow banking, which may lead to a liquidity crunch, while the rising local government debt has loomed over China’s economy for quite some time,” she said.
Still the outlook for China’s economy may be good because of economic recoveries around the world, she said.
The US posted a better-than-expected economic performance in the fourth quarter of 2013, and the European Union may finally end their economic contraction.
“Growing external demand will enable China’s exports to play a positive role in the economy,” Wang said.
During December’s credit crunch, the People’s Bank of China was reluctant to inject extra liquidity into the interbank market as it fended off potential risks to the financial system.
It also clamped down on shadow banking that resulted in excessive credit. Shadow banking refers to banks offering short-term wealth management products as a higher-yielding alternative to traditional bank deposits, which analysts warned has contributed to excessive debt growth.
China’s local government debt totaled 17.9 trillion yuan (US$2.96 trillion) at the end of June, the National Audit Office said last month.
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