4 risks worth special attention in #China’s #economy and financial sector currently, said Liu Yuanchun:
1. Growing bad debts have placed greater strains on the capital replenishments of small and mid-sized financial institutions.
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2. The budgets of local governments are under huge pressure due to the pandemic, adding to the risks of ballooning government debts and implicit debts.
3. The macro leverage ratio may swell in the foreseeable future, so China needs to think about how to cushion its negative impacts and handle the consequent spike in the pressure to repay principals and interests.
4. China is likely to see tremendous cross-border capital inflows and outflows because of the global financial turmoil and the fluctuations in the exchange rate of emerging economies.
In formulating fiscal and monetary policies to prevent against financial risks, Xiao Gang reminded that a key thing for Chinese policymakers to note is to adopt policies with proper intensity at a proper pace.
His survey suggested after the May Day holiday, the growth in borrowings by #SMEs and the self-employed almost returned to pre-#COVID19 level. So it’s important to control policy strength. He advised to roll out policies in a tailored, phased manner instead of “all out at once”.
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