The standing committee of China’s top legislative body concludes its two-day annual meeting today. Strong signals out of Beijing suggest
The standing committee of China’s top legislative body concludes its two-day annual meeting today. Strong signals out of Beijing suggest Zhao Xiaochuan, the incumbent central bank governor, is going to retire before March. Reviewing new appointments is one of the big agenda items of the meeting.
A successor will need to deal with national debt at 260% of GDP and a slumping real estate sector which holds $158 billion in corporate and local government debt, most of which must be repaid later this year. But debt continues to rise, up 16% rise in 2017.
Chinese authorities say they will bring debt under control within 3 years but also want to retain high growth rates. The new governor will be under immense pressure to implement a monetary policy designed to achieve these goals. But he (it’s almost certain to be a man) may face difficulties striking the right balance; tightening lending rates will impact on growth and cause displeasure to many. Expect more credit-equity swaps, mass refinancing of corporate and public debt and some defaults if Beijing fears their growth targets will not be met.
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