As China shifts gears towards a slower and more sustainable growth in President Xi Jinping’s “new normal”, its economy is going through a “period of pain” and the rapid expansion of the nation’s shadow banking sector alongside overcapacity are major problems, China’s Vice Finance Minister Zhu Guangyao told Reporters at the G20 Leaders Summit in Australia on Saturday, Reuters reports.
“We are changing gear and our economic structure is undergoing a period of pain and a period where we are absorbing the large-scale stimulus packages we rolled out earlier,” the Vice Finance Minister said.
China’s economy will be “running at relatively high speed instead of super high speed,” Zhu said, acknowledging that the nation has had its share of “problems that have been accumulating over time”.
Zhu said that although the nation is shifting gears, that it faces major problems in the shadow banking sector in addition to overcapacity.
“The main problem of shadow banking is the offshoot business of the banks, and it’s mainly about the trust funds that they run,” Zhu said.
Zhu said that although the size of the nation’s shadow banking sector is rather small, in comparison to the nation’s total financial volume, however the largest risk in China is that the shadow banking sector is expanding at a very rapid clip.
On Friday, China released data that showed that bank lending had plunged in October and that money supply growth had also cooled, both of which raised fears that the nation faces a sharper economic slowdown and also prompted calls for additional stimulus measures which included interest rate cuts.
The Vice Finance Minister said that the global economic recovery was too slow and unbalanced and urged that the U.S. ratify the delayed IMF quota and governance reform package.
Source: Reuters
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