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China’s level of leverage is heading north at an alarming pace
China’s official Xinhua news agency cited head of the People’s Bank of China’s research bureau, Xu Zhong as telling that China’s overall leverage level happens to be reasonable enough, but it’s ascending at rather an alarming tempo. That’s especially true for the financial sector. Therefore, the Chinese government has to get down to deleveraging at the right pace for the purpose of reducing financial sector debt and also avert systemic financial risk.
Relatively high levels of stimulus spending from government got along with quite poor corporate management as well as financial supervision. They turned to be the major factors causing ascending levels of leverage. The Chinese authorities expect to achieve financial security via reforms, and not bail-outs.
Some financial analysts suggest that the government require sticking to neutral and prudent monetary policy. They also expect the Chinese authorities to reduce emphasis on surge objectives and instead improve the corporate sector.
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