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Free AccessMNI POLICY: China Should Look To Slow, Not Cut Leverage: Huang
BEIJING (MNI) - Beijing should focus on curbing leverage growth at a
certain level rather than actively seeking to reduce it, said Huang Yiping,
former member of the central bank's Monetary Policy Committee, in his speech on
Thursday.
Huang who is now the deputy director of the National School of Development,
has collected borrowing data from 43 global economies' from 1980 to 2017,
finding that that their average leverage in the five years before the global
financial crisis was at a historical low.
This, he said, challenges the view that "high leverage (levels) could
easily trigger a financial crisis".
But he did accept that the average growth rate in leverage ratios was at an
all-time high before the crisis, although government debt levels were not, said
Huang.
Huang believes, therefore, that in terms of crisis prevention, the
authorities should focus on curbing the growth and stabilize the leverage at a
certain level rather than continue with their focus on deleveraging
Huang emphasized that lowering leverage in certain sectors is more
important than reducing the overall levels.
--CHINA'S LEVERAGE STABLISING
According to Huang, China's total leverage ratio over the past two years
appeared to show signs of stability. The government's leverage ratio has been
rising, but is still at relatively low levels compared to other developing
countries.
He accepted that corporate leverage has risen quickly and already sits at a
high level compared to global norms, although there has been a clear recent
trend of stabilizing or even declining. Household leverage is not high,, but
there is an obvious upward trend, Huang added.
--MNI Beijing Bureau; +86 (10) 8532-5998; email: wanxia.lin@marketnews.com
--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com
To read the full story
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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.