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July 6, 2018

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Steady progress made in deleveraging

China has made steady progress in deleveraging and the country’s leverage ratio will gradually be lowered, the Economic Daily has reported.

“China has entered a stage of stable leverage as the country’s deleveraging efforts have delivered primary effects,” Liu Shijin, vice president of the China Development Research Foundation, a government think tank, told the Economic Daily.

Since 2017, the growth of China’s leverage ratio has slowed down substantially. The leverage ratio in 2017 was 2.4 percentage points higher than 2016. The growth was 10.9 percentage points lower than the average annual growth rate from 2012 to 2016, Liu said.

The slowdown came after a rapid growth of corporate profits and fiscal revenues boosted by the supply-side structural reform, the implementation of a prudent, neutral monetary policy and stronger financial rules, said Liu, who is also a member of the monetary policy committee of the People’s Bank of China.

He added that China’s leverage structure has become optimized with corporate, government and personal leverage ratios all lowered.

Liu believes China will be able to continue stabilizing its macro leverage and gradually cut the leverage ratio, citing a quality-oriented economic shift, tighter financial supervision, and progress in cutting overcapacity.


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