New Delhi, Nov 8 (SocialNews.XYZ) The macro set-up and policy-makers' preference for orderly defaults imply that policy-makers should be able to maintain control over domestic financial conditions (i.e., real rates), allowing China to avoid a financial shock, Morgan Stanley said in a research note.
"The start of every deleveraging process in China prompts fears about downward pressure on growth. These investor concerns are re-emerging, reflected in wider credit spreads. However, we believe that some of these concerns are overdone," the report said.
"The fear is that rising default risks could turn disorderly, leading to a rapid tightening of financial conditions and a sharper slowdown in growth. We don't see this materialising given the self-funded nature of China's growth," it added.
The banking system has limited exposure to the property sector. Since non-performing loans and credit costs sit at low levels overall, it should be able to handle any rise in delinquencies in the property and construction sectors.
Policy-makers have the tools to manage aggregate demand by controlling the pace of deleveraging.
In this cycle, China's zero-Covid policy and adherence to its energy intensity and consumption targets have added downward pressure on GDP growth, which has weakened to a 4.9 per cent 2Y CAGR (underlying growth adjusted for base effects) in 3Q21.
This has prompted policy-makers to hit a pause to balance their growth and debt-management objectives, the report said.
Source: IANS
Gopi Adusumilli is a Programmer. He is the editor of SocialNews.XYZ and President of AGK Fire Inc.
He enjoys designing websites, developing mobile applications and publishing news articles on current events from various authenticated news sources.
When it comes to writing he likes to write about current world politics and Indian Movies. His future plans include developing SocialNews.XYZ into a News website that has no bias or judgment towards any.
He can be reached at gopi@socialnews.xyz
This website uses cookies.
