The People's Bank of China (PBOC) Governor Zhou Xiaochuan’s comments about China having the political resolve to avoid what he termed a “Minsky Moment” continued to attract attention at the Communist Party Congress.
As we have long stated, said political resolve will only continue to lead to an unhealthy evergreening of nonperforming loans to state-owned enterprises, which ultimately weigh on potential growth.
In the absence of constant stimulus, growth in the "Old China" economy will continue to decelerate from its 1Q17 peak.
In that regard, it’s worth highlighting that PBoC liquidity provisions via open market operations and medium-term lending are tracking down -127% and -28%, respectively, in the YTD.
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