China’s top financial policymakers expressed determination on Friday to push on with their campaign to reform and rebalance the world’s second-largest economy even as growth cools.Manufacturing activity in China has slowed for the past eight months, prompting expectations that regulators could dramatically loosen monetary and fiscal policies to spur the economy, as they did during the last global downturn. However, top officials who spoke at a financial forum in Shanghai indicated they will maintain the current “prudent” policy mix, while continuing with reform.
China will also expand the financing channels available to banks, allowing them to raise funds overseas and retain higher levels of profit, Chinese banks have been in the spotlight in the past year with investors worried that a slowing economy may increase losses from bad loans, especially after the banks loaned some 10.7 trillion yuan to local governments following the 2008-09 financial crisis.Nearly all these reforms, such as boosting institutional investment, are long-term positive factors, and will not immediately push large amount of money into the market, Early economic indicators suggest growth did not pick up in June, raising doubts over whether China can meet its 2012 growth target of 7.5%, a level many thought the economy would comfortably exceed when it was announced in March. The reform push led by the central bank and other financial watchdogs represents a change in approach by Beijing from the last crisis. To offset the effects of the global downturn that began in 2008, China unleashed a wave of policy lending, infrastructure spending and other fiscal stimulus. It successfully revived growth but exacerbated existing structural economic distortions, encouraging real estate and stock speculation and enabling local governments to incur the USD 1.68 trillion pile of debt.