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Economy

China's economy to follow "L-shaped" trajectory for foreseeable future

May 09, 2016


Abstract : China's economy will follow an L-shaped path as downward pressures weigh and new growth momentum has yet to pick up, the People's Daily on Monday quoted an "authoritative figure" as saying in an exclusive interview.

BEIJING, May 9 (Xinhua) -- China's economy will follow an L-shaped path as downward pressures weigh and new growth momentum has yet to pick up, the People's Daily on Monday quoted an "authoritative figure" as saying in an exclusive interview.

The country's economic growth, which slowed to its lowest level after the global financial crisis, will not see a U-shaped or a V-shaped rebound, but follow an L-shaped path going forward, the source said.

The People's Daily, flagship newspaper of the ruling Communist Party of China, did not disclose the name of the source, but the term "authoritative figure" is usually used for high-level officials.

The source said China's economic growth has been stable and "within expectations," but warned of emerging problems such as a real estate bubble, industrial overcapacity, rising non-performing loans, local government debt and financial market risks.

High leverage is the "original sin" that leads to risks in the market for foreign exchange, stocks, bonds, real estate and bank credit, the person was cited as saying.

According to the authoritative figure, the country should make deleveraging a priority, and the "fantasy" of stimulating the economy through monetary easing should be dropped. The country needs to be proactive in dealing with rising bad loans, rather than hiding them.

The economy enjoys huge potential, high resilience and ample leeway, which means its growth will not plunge, even without stimulus policies, the authoritative figure said.

China will avoid a massive stimulus plan to boost growth, which would have a short-term effect but risk long-term damage. Instead, the country has chosen a much harder but more sustainable path of development in pursuing supply-side structural reform, according to the source.

The stock market, foreign exchange market and real estate market should return to their respective functions instead of being used at means of maintaining economic growth, the source said.

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Keyword: China economy

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