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China Confident About Stability, Continuity of Macroeconomic Policies

Risks in so-called shadow banking in China have somewhat eased, while non-performing loans are still at a relatively low level
The PBOC has been steadily moving to contain financial system risks.The PBOC has been steadily moving to contain financial system risks.

China remains confident in its ability to fend off systemic risks in the economy and keep its fundamentals healthy and stable, the official Xinhua News Agency reported on Sunday, citing a statement from the governor of the central bank.

Potential risk levels in China's financial sector have somewhat increased in recent years because of a slowdown in the country's economic growth, as well as structural adjustments and big fluctuations in international financial markets, Zhou Xiaochuan said.

But China's economy, the world's second biggest, is expected to be able to achieve its annual growth target of around 6.5% this year, Zhou said. The country will continue to maintain the stability and continuity of its macroeconomic policies, he added.

Risks in so-called shadow banking in China have somewhat eased, while non-performing loans are still at a relatively low level. China will prevent systemic risks from increasing by de-leveraging and curbing asset bubbles while maintaining a modest growth of its economy, the statement said.

Zhou submitted the statement to a meeting of the International Monetary and Financial Committee, the steering body of the International Monetary Fund, which was held in Washington over Oct. 13-14, Xinhua said.

Banks Extend More Loans

Chinese banks extended more loans than expected in September, buoyed by demand from home buyers and companies, Reuters said.

September loan data released on Saturday indicate that China has continued to give significant credit support for its economy ahead of a key Communist Party congress that starts on Wednesday. Both bank lending and total social financing, a broad measure of credit and liquidity, look set to hit another record high this year.

In September, banks extended 1.27 trillion yuan ($193.05 billion) in net new yuan loans, the People's Bank of China data showed. Analysts polled by Reuters had predicted 1.1 trillion yuan, compared with August's 1.09 trillion yuan.

Household loans, mostly mortgages, rose to 734.9 billion yuan in September from 663.5 billion yuan in August, according to Reuters calculations based on the PBOC's data. Household loans accounted for 58% of total new loans last month, down from 61% in August.

Short-term loans soared in the third quarter, increasing by 1.53 trillion yuan, almost three times higher than in the year-ago period, according to calculations by Wen Bin, an economist at Minsheng Bank. "A part of these funds is flowing illicitly to the property market and stock market," said Wen.

Corporate loans in September were 463.5 billion yuan, down from 483 billion yuan a month earlier. The growth was in part due to a "seasonal increase in credit and fiscal deposits," said Wen.

Broad M2 money supply in September grew 9.2% from a year earlier, beating forecasts for an 8.9% expansion. The PBOC has said that the slowing M2 growth could be a "new normal" due to regulators' stepped-up crackdown on risky shadow lending activities.

Total social financing, a broad measure of credit and liquidity in the economy, rose to 1.82 trillion yuan in September from 1.48 trillion yuan in August.

The PBOC has been steadily moving to contain financial system risks, while reiterating that it will maintain prudent and neutral monetary policy and continue with interest rate reform.

Xi Tightening Clutch on Power

Chinese leader Xi Jinping is expected to tighten his grip on power at  the Communist Party conclave, cementing his stature as the country’s most dominant ruler in decades, AFP reported.

The five-yearly congress will give Xi an opportunity to enhance his control over the world’s second largest economy by stacking the halls of power with loyalists.

The 64-year-old supremo will undoubtedly be granted the customary second term as general secretary of the Communist Party, but analysts will watch for signs that he may try to hang on beyond 2022.

Xi’s clout has drawn parallels with Mao Zedong, modern China’s founder, and Deng Xiaoping, who spearheaded economic reforms as paramount leader from the late 1970s to early 1990s.

“We can basically describe there as being three eras: The era when Mao was in power, Deng Xiaoping’s era, and now the 19th Party congress is in some sense the complete opening of the Xi Jinping era,” Chinese political expert Chen Daoyin told AFP.

 

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