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 Chinese leaders have repeatedly tried to reassure jittery financial
markets and China's major trading partners that Beijing is able to
manage the slowing economy, following a slide in the country's stock
market and depreciation of the yuan.
Recent data, until early March, including fixed-asset investment and
employment, showed that the economy is improving, Vice Premier Zhang
Gaoli told a high-level economic forum.
"We don't want to shy away from saying that China's economy is
facing downward pressure, but overall the progress is steady," he
said.
Commerce Minister Gao Hucheng told the forum China's foreign trade
was likely to show a big rebound in March after falling in the first
two months of the year.
China's manufacturing output in January and February grew at its
weakest pace since 2008, according to data released by the National
Bureau of Statistics earlier this month.
Speaking at the same forum, central bank governor Zhou Xiaochuan
said that capital outflows out of China have showed a significant
easing, citing an abating of concerns about a slowdown in the
world's second-largest economy.
Still, Zhou expressed concern about the high level of corporate debt
relative to gross domestic product even as he noted the relative
cushion offered by China's higher savings rate, which was just over
46 percent of GDP last year.
"The overall leverage rate of China's economy is on the high side,
which is the overall debt to GDP ratio we have often talked about,
especially the ratio of corporate lending to GDP is on the high
side," said Zhou.
Zhou said the "relatively high" leverage ratio could cause some
risks and therefore greater attention must be paid to the issue,
repeating his comment made at a press conference on the sidelines of
a G20 meeting of central bank governors and finance ministers in
Shanghai.
Ratings agency Standard and Poor's said in a report in July that the
size of China's corporate debt had risen to 160 percent of GDP in
2014, from 120 percent in 2013.
Zhou's comments on debt highlights lingering worries among
authorities about the risks of corporate defaults - a potential
danger point for a cooling economy especially as investors remain
wary over the recent turmoil in its markets
CAPITAL FLIGHT NOT WORRISOME
The central bank's Zhou said some short-term speculative money may
be leaving China, a reversal of the trend a few years ago when China
saw big capital inflows, but the current flight of money was not
worrisome.
Recent data showed net foreign exchange sales by the central bank
and commercial banks dropped in February as the yuan stabilizes,
partly due to the dollar's broad retreat as expectations cool on
further interest rate rises by the U.S. Federal Reserve.
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Analysts say China's central bank still faces a tough job stemming
capital outflows, citing persistent downward pressure on the
economy.
The government will make preemptive policy adjustments to help keep
economic growth within a reasonable range, Vice Premier Zhang said,
reaffirming the official stance.
The government also needed to curb risks in the stock, debt,
currency and property markets, prevent "cross infection" between the
markets and ward off systemic risks in the economy, Zhang said.
China will press ahead with "supply-side reforms" to cut excess
industrial overcapacity, focusing on such sectors as coal, steel,
aluminum and plate glass, he added.
The government has set a growth target of 6.5 percent to 7 percent
for 2016, after the economy expanded 6.9 percent in 2015 - the
slowest pace in 25 years.
Beijing has pledged to make monetary policy more flexible this year
even as it leans more on increased fiscal spending and tax cuts to
support economic growth and cushion the pain from structural
reforms.
Finance Minister Lou Jiwei told the forum that he saw little market
impact caused by Moody's recent downgrade of its outlook on China’s
government debt.
On March 2, Moody's Investors Service lowered its outlook on Chinese
government debt to "negative" from "stable", citing uncertainty over
authorities' capacity to implement economic reforms, rising
government debt and falling reserves.
“I don’t care too much about its ratings,” he said, adding that the
government will be able to deal with the problems cited by the
ratings agency.
(Reporting by Kevin Yao; Editing by Muralikumar Anantharaman & Shri
Navaratnam)
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