China vulnerability sentiment ends 2017 on a high note

HONG KONG – BBVA’s China Vulnerability Sentiment Index (CVSI) ended 2017 on a high note, extending previous gains. The improvement was underpinned by a shift in policy focus towards quality of growth, PBOC’s prudent monetary policy stance, a stable yuan and ongoing efforts to curb risks to financial stability emanating from housing, SOEs and the shadow banking sector, BBVA said.

While the SOE & Housing vulnerability indices saw slight deterioration, the Shadow Banking vulnerability index held on to its gains as Exchange rate vulnerability index recovered.

“The improvement in CVSI is reassuring,” BBVA said. “However, China’s debt burden continues to rise, albeit at a slower pace.

“The Chinese leadership is aware of the risks posed by financial fragilities and is committed to tackle them. With no room for complacency, markets will test whether policymakers live up to their reform promise in 2018, especially given a slowing growth outlook. www.bbvaresearch.com (ATI).