China's central bank sees 'very low' risk of hard landing

Sat Oct 11, 2014 11:56am EDT
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By David Brunnstrom

WASHINGTON (Reuters) - The chance of a hard landing for China's economy is very small in spite of worries about the country's real-estate sector, the chief economist of the People's Bank of China said on Saturday.

Ma Jun told a panel on the sidelines of the IMF and World Bank fall meetings in Washington that the property sector, which accounts for 20 percent of total investment in China, was the main downside risk to the Chinese economy.

However, he said the sector was not the only driver of growth.

"I think the chance of a hard landing is very low," Ma said.

"Although we worry about some downside risk like the real-estate slowing down and so on, there are also growth engines, including the service sector in general, the Internet in particular ... and healthcare is rising very rapidly."

Ma said the slowdown in real estate was putting downward pressure on the economy and some further deceleration in the sector was possible given weak public sales.

He said leveraging in the real-estate sector, in state-owned enterprises and in local government financing vehicles was too high and had been rising in the past few years. This was a key reason for the government's policy of avoiding "excessive stimulus" to the economy.

"At the macro level, I think we need to avoid excessive stimulus, which could increase leveraging significantly in the longer term, even though GDP growth is slowing a bit," he said.   Continued...

A Chinese national flag flutters in front of the headquarters of the People's Bank of China, China's central bank, in central Beijing, May 16, 2014. REUTERS/Petar Kujundzic