'China must end reliance on credit-driven growth'

BEIJING • China must turn off the taps of credit-driven growth to avoid a financial system crisis in the face of rising bad loans and other risks, the People's Daily said yesterday, citing an unnamed "authoritative" source.

The prominent article in the Communist Party's official mouthpiece, in a question-and-answer format, started on the front of the broadsheet paper and took up all of the second page.

China is trying to retool the economy and move it away from the investment- and export-led growth of the past to one that is led by consumer demand. It is also seeking to reform loss-making state-owned enterprises to make the sector more efficient.

But the transition is proving bumpy, raising fears of a hard landing. Global markets are also alarmed by China's slowing expansion.

Attempts to address the slowdown in the first quarter of this year - when growth slid to 6.7 per cent - were largely driven by investment, the People's Daily quoted the source as saying, putting more financial pressure on some local governments.

Analysts said the comments could be a signal that Beijing is to rein in monetary stimulus efforts.

It is the third time in less than a year that the People's Daily has cited "an authoritative person" to discuss top-level economic policies.

Chinese news portal Sina has previously said such an "authoritative source" in similar People's Daily articles could be a high-ranking government official, such as the head of the National Development and Reform Commission - the top economic planning agency - or a respected scholar who participated in major economic policymaking.

"While the anonymity has been protected, the views expressed in these articles did have a large impact in China," said Nomura economists in a note.

AGENCE FRANCE-PRESSE

A version of this article appeared in the print edition of The Straits Times on May 10, 2016, with the headline ''China must end reliance on credit-driven growth''. Print Edition | Subscribe