The chief editor of one of China’s leading financial news organisations has called for Beijing to use the breathing space provided by current economic stability to undertake urgently needed reforms.
In an editorial piece entitled “Economic Stability is Apt for Reform” (经济企稳宜改革) Hu Shuli says the recent strong performance of the Chinese economy provide an outstanding opportunity to policymakers to advance their reform agenda.
Data released by the National Bureau of Statistics indicates that China’s GDP expanded by 6.9% year-on-year in the second quarter, holding steady with first quarter performance and surpassing consensus expectations.
While this performance “highlights the resilience and potential of the Chinese economy,” Hu Shuli notes that “structural imbalances accumulated over the long-term continue to remain salient.”
“The improvement of the economy midst stability provides a rare opportunity for reform,” said Hu. “Reform is urgently needed to strengthen the foundations for economic development, and there is a positive reciprocal relationship between achieving reform and development.”
According to Hu structural reforms of the Chinese economy continue to lag despite the impressive performance posted over the last two quarters.
“The pace of structural adjustments to the economy continues to be slow, while leverage in the real economy remains high, and enterprise operating and business costs continue to rise,” said Hu. “Risk is considerable, and we cannot overlook medium-to-long term downward pressure on the economy in the second half of the year, or even over the medium-to-long term.
“A central bank official recently pointed out that China continues to accumulate non-performing asset risk, liquidity risk, shadow banking risk, external shock risk, real estate bubble risk, government debt risk and online financing risk…this assessment is no exaggeration.
“China needs to seize the positive opportunity of current economic stability and controllable financial risk to accelerate the implementation of various reform measures that have already been set.”
According to Hu the raft of measures unveiled by the central government at the National Financial Work Conference just following the release of upbeat data for the first half represent an apt response to China’s strong economic performance, including the establishment of a financial stable development commission by the State Council and the strengthening of macro-prudential administration by the central bank.
“Reform of the financial regulatory system is is of the utmost importance, as well as an issue of great urgency,” writes Hu.
“At present the State Council has not publicly released details about the organisation or professional functions of the financial stable development commission, but overall preparation for the development and regulation of financial reform and the coordination of monetary, fiscal and industry policies, as well as the strengthening of the authority and efficiency of regulatory coordination, are all apt and appropriate measures.”