Demystifying China's Mega Trends by Lo Chi;

Author:Lo, Chi;
Language: eng
Format: epub
Publisher: Emerald Publishing Limited
Published: 2017-04-18T16:00:00+00:00

What Signs to Look for?

Privatising the state assets would generate about RMB18 trillion in revenues, according to estimates by the State-owned Assets Supervision and Administration Commission (SASAC). This would be enough to reduce LGFV debt by more than 90%, equivalent to almost 20% of all outstanding SOE corporate debt. The final question is what signs should we be looking for to gauge whether Beijing is serious about deleveraging the system process or just paying lip-service?

The first clue is in the composition of the aggregate liquidity flows. The types of credit delivered to the economy are as important as the absolute amount. The former affects the structural foundation and risk profile of the system while the latter affects its cyclical fluctuation. Since 2014, Beijing has started to improve the structure of the liquidity flows by restricting the growth of shadow banking credit, including entrusted loans, trust loans, bankers’ acceptance bills and curb-market lending (Figure 21).

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