MNI POLICY: China Should Push On With Deleveraging: Advisor

     LONDON (MNI) - China should continue with its deleveraging campaign, even

if policymakers have had to temporarily slow measures to avoid an economic

slowdown, a government advisor told MNI Wednesday.

     "The deleveraging policies should not make a 180-degree turn because there

are still a pile of problems in economy," Zhang Xiaojing, deputy

director-general at the National Institution for Finance & Development under the

Chinese Academy of Social Sciences (CASS) told MNI on the sidelines of the World

Economic Forum's summer gathering in Tianjin.

     Stabilizing growth shouldn't compromise targets of promoting reform and

preventing financial risks, he said.

     In an earlier speech, Zhang had underlined CASS's opposition to slowing the

de-leveraging campaign. The main points highlighted in his speech were:

     -- Policymakers need to prioritise consideration of how much they can curb

the deleveraging push without encouraging excess easing. However, Zhang stressed

the need for economic policy stability so as not to roil financial markets.

     -- In the long run, leverage will continue to rise even as growth slows

when the economy moves into the higher income stage. We should not expect a

comprehensive deleveraging, but a structural one," Zhang said

     -- The deleveraging campaign is having a noticeable impact, with leverage

in the financial sector falling to 2014 levels and non-financial sector leverage

contracting for 5 consecutive quarters.

     --The diverging performance of SOE and private sector leverage is due to

the campaign, but the private sector's ratio has been affected by a marked fall

in assets.

--MNI Beijing Bureau; +86 (10) 8532 5998; email: marissa.wang@marketnews.com

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

--MNI London Bureau; +44208-865-3829; email: Jason.Webb@marketnews.com

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