(Yicai Global) Nov. 21 -- Leading Chinese economists predict that China will not flip-flop its monetary policy given the downside risks facing the economy, but it is open to debate as to whether there will be a turning point in market liquidity.
The economists shared their opinions during the Yicai Finance Summit (Annual Conference of China International Finance Society) held on Nov. 19.
Liquidity is unlikely to change as long as there is no major shift in monetary policy, and it is still too early to talk about a turning point in liquidity, said Lian Ping, chief economist at the Bank of Communications Ltd.
Despite figures suggesting that China's economic growth is stabilizing, there are causes for alarm such as a sharp fall in private investment and an anticipated decline in real estate investment, Lian said. This means that a cash crunch is unlikely to happen over the short term and such a shift will not occur from now till early 2017.
But as the central bank tightens regulation over non-credit and 'non-standard' wealth management businesses, said China Zheshang Bank Co. Chief Economist Yin Jianfeng, the expansion of credit will be restrained and a turning point in liquidity is coming soon. He said domestic liquidity will go through profound changes in 2017.
The central bank has three objectives in developing monetary policy: stabilizing exchange rates, economic growth and house price, Yin noted, but only two of them can be achieved at any given point in time.
Judging by what happened this year, stabilizing exchange rates has become a secondary target, and achieving a 6.5 percent economic growth target is already a foregone conclusion, Yin said. The top priority next off is to stabilize house prices – or rather, to control risks.
Regarding investment opportunities in 2017, according to the chief economist at Deutsche Bank China, Zhang Zhiwei, rising inflation in the country over the last couple of months leaves little scope for the central bank to further relax monetary policy. A fall in commodity prices is a cause for concern in 2017.