China's party congress unlikely to unleash key economic reforms: Fitch

Delegates leave the Great Hall of the People in Beijing, one day before the start of 19th National Congress of the Communist Party of China, on Oct 17, 2017. PHOTO: REUTERS

BEIJING (REUTERS) - China is likely to delay debt deleveraging and other reforms in the aftermath of its 19th Party Congress as policymakers focus on achievement of growth targets such as doubling 2010 GDP by 2020, Fitch Ratings said in a note on Tuesday (Oct 17).

Fitch believes authorities will be reluctant to adopt significant reforms, despite the opportunity President Xi Jinping's expected consolidation of power could offer to shift focus to tough structural reforms.

"The authorities are likely to remain committed to high GDP growth targets," Fitch said.

"We expect financial regulation to remain high on the policy agenda to contain risks in the financial sector, but deleveraging is likely to be delayed at least for the next few years. Reform of state-owned enterprises is also likely to remain slow."

China's economy has maintained robust growth of 6.9 per cent this year, but a growing chorus is calling for faster progress on reining in credit and downgrading the importance of GDP growth targets.

Credit ratings agencies Moody's Investor Service and S&P Global Ratings this year downgraded China's sovereign ratings on concerns debt will continue to rise as Beijing relies on stimulus to hit growth targets.

The International Monetary Fund (IMF) has warned of growing risks of a sharp adjustment in China's economy, due to a focus on meeting growth targets that require a steady diet of stimulus.

Fitch expects China to pursue a "status quo scenario" after the Congress, yielding only gradual progress on supply-side reform and efforts to stabilise debt.

Fitch forecasts China's GDP to grow 6.3 per cent in 2018 and more than 6 per cent in 2019.

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