Global investors believe policy space to stabilise Chinese economy

27 May, 2019 12:00 AM printer

NEW DELHI: Global investors are not very concerned about the recent China-U.S. trade escalation's impact on the Chinese economy, said Zhang Dewei, chief China economist and head of China Equity Strategy at Deutsche Bank.

When China is challenged by external forces, the Chinese government will loosen its policies to stabilize the economy, Zhang said at a two-day forum themed financial supply-side reform and opening-up this weekend at Tsinghua University, report agencies.

“The Chinese government has great policy space and political measures up their sleeves. With the policy space, the government can stabilize the economy in the short term,” Zhang said.

Speaking of the policy space in China, the most frequently asked questions are whether China will come back to the development path of flooding the market with stimulation, and the debt ratio will continue to increase.

According to Zhang's observation, global investors, especially mid and long-term investors, are not worried about the debt ratio in China, since after years of climbing, the overall debt ratio stabilized in recent years.

“That's the main reason why global investors are optimistic about China's banking system and macro risks,” Zhang said. “The macro risks are lowering. That's the consensus global investors reached.”

“As the trade tension continues, we expect the policy will continue to loosen up, and it should, but to some extent, there should be a balance,” Zhang said.

He noted that there are two promising signs last year in policy changes that show the Chinese government remains prudent in macro policies. One is that the government reaffirmed real estate are not for speculation, and those responsible for local government debt will be held accountable for life.

Deutsche Bank held a global investors conference last week in Singapore where thousands of global investors attended.

Zhang's team conducted a survey during the conference on the global investors' prediction on trade tension.