Moody's: China Has Made Substantial Progress on Reform and Rebalancing
Moody's Investors Service says that China has made substantial progress on reforming and rebalancing its economy, since the government committed to deep reforms during the third plenary session of the 18th Central Committee of the Communist Party of China in November 2013. "Substantial progress has been made on reform and rebalancing, and the general direction of government policy is supported by important initiatives such as the anti-corruption campaign and the One Belt, One Road strategy," says Michael Taylor, a Moody's Managing Director and Chief Credit Officer for Asia Pacific. "However, there are two main tail risks to the relatively benign scenario that forms our core view, although we do not think either of them is very likely. The first would be an asset price correction in property or equities, and the second would be a rapid and ill-prepared liberalization of the capital account," adds Taylor. Taylor explains that China's reforms and rebalancing of its economy involve balancing the following four factors: 1) The reorientation of the economy away from state-led, capital intensive investment towards private consumption; 2) Lowering the economy's dependence on credit-fuelled growth; 3) The implementation of policies that will allow markets to play a decisive role, to scale back on the government's role in the economy, and to enhance property rights; and 4) Ensuring that short-term growth does not fall substantially below the government's target of around 7%.
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