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Economy:
Preventing and controlling risk in the financial sector, tackling poverty and protecting the environment are the three key priorities for China in the next three years, president Xi Jinping said at the Economic Work Conference, a key Chinese economic policy forum, on Wednesday.
Xi also noted that monetary policy will remain prudent and neutral, according to a December 20 statement published by the State Council.
Despite this reassurance, the absence of deleveraging in Xi’s remarks may imply a change to a looser approach to curbing banks’ balance sheet expansion in an attempt to maintain economic growth, said Yu Song, chief China economist at Beijing Gao Hua Securities, Goldman Sachs’ joint venture in China.
“Recent policy statements increasingly use the phrase ‘control of leverage’ [instead of deleveraging],” he said in a December 21 report. “In our view [this is] likely a reflection of increasing realism in policy making .”
Others weren’t so sure. Tommy Xie, economist at OCBC , believes that China has moved on from using the term deleveraging because it is focusing on the specific policies to turn the concept into reality.
“It shows the Chinese leaders are comfortable with the current progress of deleveraging,” he said in a December 21 report. “We expect China to step up its deleveraging campaign in four areas in 2018, including local government debt, control of money supply, dealing with zombie companies [and] long term mechanism for the property market.”
The bankers’ macroeconomics confidence index published by the People’s Bank of China reached 79.1% in the fourth quarter, up 3.8% from the last quarter, according to a December 19 report published by the central bank.
The report also noted that 78.6% of bankers surveyed considered the PBoC’s monetary policy as appropriate, up 3.6% from the last quarter, whereas 19.1% of bankers believe monetary policy is too tight, down 3% in the same period.
Belt and Road:
Pakistan could replace the dollar with the renminbi as the settlement currency when trading with China, Ahsan Iqbal, Pakistan’s minister for planning and development was quoted by a December 18 local media report as saying.
Iqbal was speaking at the launch of the Long Term Plan for the China-Pakistan Economic Corridor, a key component of the BRI. The plan committed the two countries to promoting cross-border RMB business and settlements in renminbi or rupees, in order to reduce the demand for other currencies.
China Development Bank issued $350m of five-year bonds to support Belt and Road projects on December 20, said the policy bank. The bonds were issued through a private placement and listed on the Hong Kong Stock Exchange.
The issuance helped cement Hong Kong’s role as a financing hub for BRI projects, said Paul Chan, financial secretary of the Hong Kong government.
“We have been the unique two-way platform connecting the mainland market and investors with the global market,” he said in a December 20 press release. “Hong Kong is well-positioned to be the key services and capital hub for the Belt and Road, and to meet the needs of the relevant projects in investment, funding and financing.”