China’s improving economic outlook is undoubtedly welcome news to Xi ahead of a congress for the ruling Communist Party of China in the fall. The president is widely expected to strengthen his mandate, with the leadership eager to maintain a smooth run-up to the meeting.
Preventing systemic risk was highlighted as the “eternal theme” of the country’s financial work, according to an official statement from the National Financial Work Conference on Sunday. The president also said he wanted to ensure China’s central bank had a larger role in dealing with such risks in the financial system.
Over-borrowing in China has long-concerned investors though analysts have suggested action from the central bank does not appear to be forthcoming.
“(There’s) a real nervousness about deleveraging, I don’t expect to see significant changes until China is forced to adapt to tighter liquidity conditions,” Collier added.
Despite concerns of the fallout from risks in the financial system, analysts say stability is the word of the day ahead of a once-every-five-years Communist Party Congress.
“The question that cannot yet be answered, however, is how the economy will hold up without unrelenting government intervention,” Neil Mellor, senior currency strategist at Bank of New York Mellon, said in a research note.
— CNBC’s Huileng Tan contributed to this report.