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No hard landing scenario for Chinese economy: expert

Updated: Feb 3,2016 11:01 AM     Xinhua

PARIS — The Chinese economy will not face a “hard landing scenario” despite it is likely to slow down in 2016, a French economist said in a recent interview.

Charlie Carre, Asia economist at the French credit insurance giant Coface, suggested an overview of the world’s second largest economy.

“There is always a positive outlook, in particular for services and consumption,” she said.

The economist said the pace of China’s growth would slow down gradually and “it was not a new trend.”

Carre believes China faces multiple difficulties and significant risks in its economic restructuring, such as overcapacity in sectors of construction, steel and chemistry, which hinders the transition of the Chinese economy. Moreover, the debt of private companies, which has been growing rapidly in China in recent years, has become a potential financial threat.

However, these risks would not make “systemic” threat to the Chinese economy, said Carre, adding the Chinese government is ready to intervene to stabilize the market and prevent large-scale risks.

“There is no systemic threats because in our view China is able to react in time and inject liquidity to banks if needed,” said the economist.

According to the latest risk assessment on countries, Coface Group said “this is an acceptable level of risk,” according to Carre. She noted that China must be alert to rising credit risk.

“China has a new economic engine, while the share of services has exceeded that of the industry in GDP of the country,” said Carre, “This means that the transition of the real economy is under way.”

China also has other advantages, such as its huge foreign reserves, a growing middle class and a very large consumer market.

Even as China’s economy is in transition, its economic growth will remain above 6 percent, one of the highest growth rate worldwide, according to Carre.

Moreover, China has taken measures to mitigate potential threats. For example, the Chinese government launched a program of “swap” in 2015 to convert the short-term indebtedness of communities in longer-term bonds with more moderate interest rates, allowing local governments to ease their debt service, said Carre.

China’s economic reform is “on the right track,” said Carre.

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