“China’s financial system must ‘adapt accordingly’ amid economic transition” | Daily News

“China’s financial system must ‘adapt accordingly’ amid economic transition”

More financial adjustments will be needed to counter headwinds over the long run as China’s economy faces demographic challenges and a heightened technology rivalry with the West, according to a Chinese central bank adviser.

China’s long-term economic transition, which has manifested itself as a slower annual growth rate every year since hitting 10.6 per cent in 2010, is now coupled with a rapidly ageing society and looming population peak, increasing the demand for more sustainable financial support and new financial tools, said Wang Yiming.

“In longer term, China is still in the process of transitioning from high to medium economic growth, so the financial system will have to adapt accordingly,” said Wang, who is a member of the Monetary Policy Committee at the People’s Bank of China (PBOC).

Wang highlighted the risk management within the country’s financial sectors as one of the crucial roles in the long-term adjustment.

As traditional industry faces slowing growth, especially after the coronavirus, Wang said that financial risk will “gradually expose” in some sectors, urging banks to identify danger “in a more granular way”.

Hi-tech industry, on the other hand, faces internal and external risks, according to Wang, as companies tend to require high investment that takes longer to produce a return while confronted with the international competition and control.

“Greater financial support is needed to develop commercial sustainability,” he added on Friday at a financial forum on the sidelines of the China International Fair for Trade in Services.

“The original financial model of supporting traditional industry … needs to be adjusted to improve the ability to respond to the risk.”

China’s annual gross domestic product (GDP) growth rate fell to 6 per cent in 2019 following the recent peak in 2010 despite its hi-tech and internet industries booming during the same 10 year period.

Wang recognised that China’s economic recovery foundation is “not yet solid”, as the “environment is becoming more complex and uncertain,” emphasising the global risk of both inflation and stagflation.

“As for the external environment, energy and food prices have risen sharply due to the impact of the Ukrainian crisis overlaid with Covid-19,” he said. (www.scmp.com/economy)


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