MNI TRANSCRIPT: Powell on Chinese Financial Sector

     WASHINGTON (MNI) - The following is the portion of a transcript from

Federal Reserve Chairman Jerome Powell's press conference after the FOMC meeting

Wednesday:

     Q: I'd like to turn your attention back to China and the health of its

financial sector, in particular. I guess I'm basing my question on reading the

transcripts from 2014 that came out earlier this month. In March of that year,

there was concern about the Chinese economy and one of your colleagues on the

FOMC at that time asked the staff about how the Chinese Economy would hit the

U.S. Economy and the staffer said that there was -- what they were worried about

was not only the Chinese Economy slowing down, but there was the financial

sector, and the quote was that there is a tremendous amount of dodgy loans in

China. Now, I was wondering if you could give us an update on these problems in

the Chinese financial sector and how you think it might impact the economy,

particularly now that they've been hit by this unexpected shock.

     A: Well, China has had a problem for some years, including from that period

of 2014 up until, I guess 17 or 18, which was essentially just a lot of debt,

for an emerging market, for an economy at the stage of evolution at the Chinese

Economy, they had very high levels of debt. Not sovereign debt the way we think

about it, but business debt, state-owned enterprises and private owned

businesses. A couple years ago the authorities tried to stop the growth and

control it, and as I mentioned, that's one of the reasons why Chinese growth

slowed and one of the reasons why global growth slowed because we felt that, and

they've actually stuck to that, even during this difficult period when they were

experiencing strains from trade negotiations and that kind of thing. The

authorities have stuck to that, and again, continued to try to do that, so to

try to control the growth of debt and that's important that they do that. We

don't think that there is any imminent risk there, although as you point out,

the coronavirus thing is a significant thing which will have some effects on the

Chinese Economy at least in the short term. The Chinese Economy is very

important in the global economy now and, you know, when China's economy slows

down, we do feel that. Not as much as countries though that are near China or

that trade more actively with China like Western European countries. We still

have 85% of our economy is domestic. We have a much smaller external sector,

trade sector because of our economies, just because of our physical location.

--MNI Washington Bureau; +1 202 371 2121; email: brooke.migdon@marketnews.com

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