China’s top economic official tried to quell fears surging debt might threaten growth, saying Tuesday financial risks are “generally under control” and Beijing can achieve this year’s development targets. Speaking at a meeting of the World Economic Forum in the northeastern city of Dalian, Premier Li Keqiang also gave a ringing endorsement of free trade and said China will stick to its commitments to fight climate change. Li sought to dispel concern about the rapid rise in Chinese debt since the 2008 crisis, which private sector analysts cite as the biggest potential risk to the world’s second-largest economy. The Moody’s rating agency cut Beijing’s credit rating May 25 and the International Monetary Fund urged Beijing on June 14 to take faster action to get debt under control.
“In the financial sector there are some risks, but we have the ability to uphold the bottom line of no systemic financial risks,” said Li to an audience of Chinese and foreign businesspeople. China has relied on infusions of credit to prop up economic growth since 2008, causing total nongovernment debt to rise from the equivalent of 170 percent of annual economic output in 2007 to an estimated 260 percent last year. That unusually high level for a developing country has prompted warnings it could cause a financial crisis or drag on economic growth. Regulators have cited reducing risk in China’s financial system as a priority this year. Banks have been told to look closely at borrowers, especially those trying to make acquisitions abroad, to ensure they can manage their debts.
“We have identified the risks in some sectors,” the premier said. “The risks are generally under control. We are taking effective measures to address these risks in a timely manner.” Li said China is “fully capable” of hitting its economic development targets. The IMF is forecasting the Chinese economy will expand by 6.7 percent this year, down from last year’s 6.9 percent and less than half of 2007’s record 14.2 percent rate. Li promised to “release greater drivers of dynamism” by opening more of the state-dominated economy to entrepreneurs.
He said Chinese and foreign companies will be treated equally, though he announced no new initiatives and made no mention of foreign complaints that Beijing is reducing access to its markets for computer security technology, farm-related biotech and other fields. While some indicators “will inevitably fluctuate,” sound economic growth “will not change,” he said. The premier also gave a ringing endorsement of free trade and said governments that face political pressure due to strains from globalisation should make sure everyone benefits instead of raising barriers to imports.