IMF Deputy Managing Director Zhu Min and China’s National Economic Research Institute Director Fan Gang yesterday told the Asia Pacific Economic Cooperation forum in Honolulu that the economy was heading for a “soft landing” as growth slows.
“It has become ever clearer that the Chinese economy is moving to a soft landing,” Zhu said. “The Chinese economy today is really moving to an inflection point, moving to more services and capital-intensive economy.”
Chinese business leaders conveyed the message that worries about a sharp downturn in the economy were unfounded.
Bank of China Ltd. (3988) Chairman Xiao Gang said the bank had controlled lending to local-government investment vehicles, whose ability to repay debt is a source of concern for the government and international investors. He told reporters at APEC that the lender, the country’s third-biggest by assets, had controlled lending to local governments. The bank said it had 531.5 billion yuan ($83.8 billion) in loans to such entities at the end of June. Xiao said much of the debt was to highway companies that had steady revenue streams from tolls.
“Their toll collections are a guarantee that they’ll repay their debt,” he said on Nov. 12.
A government audit released in June said that more than 6,000 local government financing vehicles around the country had total debt of 10.7 trillion yuan as of the end of last year. Nearly a third of China’s local government financing vehicles are losing money, according to a study published in September in the magazine of the country’s official bond clearing house.
Still, Hu said “unbalanced, uncoordinated and unsustainable development poses a major challenge to China.” The country’s wealth gap is rising, food prices rose 11.9 percent in October from a year ago and investment makes up more than 40 percent of the economy.
“It will be very difficult to say for the time being that the Chinese consumer will save the world,” Zhu said. “China invests too much and it consumes too little.”