The reiteration of a long-held view is often just bigotry or, bigotory’s kissing-cousin, stupidity. However, when analysts modify, or outright change, a position that’s news.
This happened last week when an IMF working party consisting of James DANIEL, Mission Chief for China and Assistant Director of the Asia and Pacific Department and Alfred SCHIPKE, Senior Resident Representative for China, gave a press conference at which they were newly constructive on China; especially on the subject of the financial complex.
The transcript in full of the press conference can be accessed via that link but to save you time I’ve filleted the main points below together with a condensed summary of the Q+A that followed.
Main Points
Reforms making good progress, financial sector de-risking has accelerated, credit growth has slowed, over-capacity reduction has progressed, anti-pollution efforts have intensified and this all leads to much reduced risks. Overall, confident that China will rebalance to a sustainable growth model.
Q+A
The effect of a trade war with the U.S.? Nobody wants it but it’s downside risk if it happens.
Argentina and Turkey, big problems for emerging markets? Not really, they’re containable problems.
Could China have a issue with contagion? Not really; “[It has] ..quite balanced capital flows, it has still very large reserves, it has a strong external position.”
What do you think opening up of the financial services markets recently? Discussions with policy makers suggest a sincere desire to progress these moves.
Deleveraging? Good progress; but a diet over period of time is better than a crash-diet and that’s what’s happening. The private sector is slower to deleverage than the government. Authorities are determined to keep on keeping on here.
The recent flurry of bond defaults? Very healthy, it’ll encourage better risk pricing.
Middle-income trap, passed or falling into? China’s a big place with many economies. It’s hard to generalize. Progress must be continued though.
Biggest changes in the last 3-years? Financial sector risks. Three years ago they seemed significant and we published papers to that effect. Now they seem to be being addressed by a flurry of reforms.
Growth target? 5.5% to 2023.
Fintech? China’s at the cutting edge so we learn from regulators there.
Household debt? Rising but that’s no bad thing. It comes off a very low base.
You like One Belt One Road (OBOR) but you don’t like the old capital intensive growth model. How’s that? OBOR is about connectivity and increasing trade. That’s what we particularly like about the initiative.
So, don’t just take my word for it that China’s barrelling ahead in a sustainable fashion. The IMF now, officially, reckons so too.
Happy Sunday.