MNI 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