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Free AccessMNI Exclusive: Deleveraging Goal Needs Targeted Enforcement
--More Targeted RRR Cuts Will Launch: Li
--Fiscal Policies Have Not Been Accommodating: Li
BEIJING (MNI) - The People's Bank of China (PBOC) should further fine-tune
its monetary policies, including applying more targeted cuts of the reserve
requirement ratios, to meet the objectives of deleveraging and shepherding the
economy, Li Daokui, a former member of the central bank's Monetary Policy
Committee, told MNI.
"The central bank should launch more targeted policies to loosen credit
properly and increase supply of financial resources, meanwhile encouraging banks
to participate in corporate bankruptcy and restructuring," Li, also a Tsinghua
University economist, said in an interview at the sideline of a financial forum
last week in Beijing.
More official advisors and economists are recommending easing the tight
policy bias and slow the pace of deleveraging, as several indicators signaled
further deterioration in the economy due to the credit squeeze.
The current slowdown is mainly due to the inaccuracy of policy-making in
conducting the deleveraging campaign, Li said during the forum, warning that the
dramatic declines in credit growth and lending from shadow banks due to the
tight financial regulations have significantly dragged down infrastructure
investment and raised refunding costs.
--TARGETED POLICIES
The biggest problem facing the Chinese economy now is that inefficient
firms have occupied about 10% the country's financial resources, or over CNY2
trillion in loans per year, while potential projects are lacking financing, Li
noted.
"The willingness of relevant parties, including banks and local
governments, to participant in debt restructuring is very small, which is the
problem policies should deal with," Li noted. "If we keep the current pace, it
would take at least 5 years to restructure about the CNY6 trillion estimated
debts: It is too slow," he said.
In addition, fiscal policies have shown a contracting bias, contra to the
requirement of proactive fiscal policy and prudent and neutral monetary policy,
Li warned.
In the first five months of this year, fiscal revenue grew 12.2% from last
year, but spending growth declined to 8.14%, compared with 14.68% during the
same period last year.
"According to our calculation, the fiscal deposit has grown CNY7 trillion
this year, the same amount that the previous targeted RRR cut unlocked, which
means the PBOC is injecting liquidity while Ministry of Finance is draining it,"
Li noted.
--MNI Beijing Bureau; +86 (10) 8532 5998; email: marissa.wang@marketnews.com
--MNI Singapore Bureau; +65 8233 2326; email: Asia-Editor@marketnews.com
--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com
[TOPICS: MAQDS$,MMQPB$,M$A$$$,M$Q$$$,MT$$$$,MX$$$$]
To read the full story
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Please enter your details below.
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.