Investors should not worry too much about a waterfall of bankruptcies from financial risks and reforms in China, as the country gets ready for a leadership congress this fall, an economist said Tuesday.
“I think (fears are) overblown for this year. This is a year in China where politics really trumps economics with the leadership reshuffle happening in October or November,” said Nomura’s chief economist for Asia ex-Japan, Rob Subbaraman.
The world’s second largest economy is widely expected to maintain economic and social stability in the run-up to a key Communist Party Congress in the fall where a leadership reshuffle will take place. The last such meeting was in 2012.
“When we look at the broader policies setting, they don’t look overly tight to us,” Subbaraman added to CNBC’s Capital Connection.
Monetary policy is neutral, while fiscal stimulus is still “very strong” in the financing of infrastructural projects, he said.
“Our sense is that this is a very gentle slowdown ,” he said.