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Slowdown may delay financial reforms
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CHINA’S protracted slowing economic growth could delay financial reforms as the government may be inclined to unveil further stimulus measures, Fitch said in a report yesterday.
The People’s Bank of China has indicated that special liquidity tools may continue to be used to bolster the economy as the central bank confirmed on November 6 that it had injected 769.5 billion yuan (US$126 billion) into the banking system in September and October via its medium-term lending facility.
Although nothing like a broad-based monetary easing, the move signaled the government is under pressure to stimulate the economy, raising chances for delay to parts of the planned reform timetable, including liberalizing deposit rates in the banking sector, Fitch said.
“The reform impetus remains intact but the longer the economy slows, the greater the risk that the government will delay or water down its immediate objective of returning the economy to a more sustainable growth path,” Fitch said.
Fitch said interest rate liberalization in the banking sector is most likely to be shelved to ensure a cheap source of funding for China’s lenders. Chinese monetary policy-makers have indicated that the interest rate will be fully liberalized in 2016.
An array of economic data released yesterday showed that China’s economy continued to lose pace, with industrial activities and fixed-asset investment easing further in October.
China’s gross domestic product grew 7.3 percent in the third quarter, the slowest in more than five years.
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