China Watcher Fraser Howie: Faster Pace of Economic Reform Not Likely
This time, it’s different. Or so many observers say. Now that Chinese President Xi Jinping and his team are in power, there is excitement about the dramatic change in the public face of the Chinese political leadership. Many are viewing Xi as a technocrat and moderate with a liberal background and expect him to implement economic reforms at a faster pace.
Fraser Howie, who delivered a lively presentation on reform expectations in the Chinese capital markets last week at the 66th CFA Institute Annual Conference in Singapore, is not as optimistic. A decade ago, when former President Hu Jintao and his team came on board, Howie said, the public generally had similar expectations, only to be disappointed. Howie, a former managing director in the derivatives unit at CLSA, is the co-author of two books on China, Red Capitalism and Privatizing China.
When it comes to current market conditions, Howie has his concerns. Although the country’s GDP growth has been maintained at around 8%, he said, China’s dependence on credit to fund growth is a major worry. Total social financing (TSF) — the official liquidity measure that reflects the magnitude of liquidity support from the entire financial system to the real economy — has been rising twice as fast as GDP in the past decade. It stood at RMB (renminbi) 16 trillion around the end of 2012. In the past four years, it has grown by around 125%.