Despite China’s current economic difficulties, the country cannot accelerate economic growth by increasing leverage, stated an authoritative insider in an interview with People’s Daily. He explained that high leverage would inevitably bring high risks.

Although statistics from the first quarter exhibited a good start in growth, there are still difficulties ahead. Talking about whether a stimulus should be used given the complicated domestic economy, the insider urged China to control the risk and avoid a potential crisis.

“High leverage will inevitably bring about high risks, which could lead to a systemic financial crisis, negative economic growth, and could even wipe out people's savings," the insider warned.

“To push the economy by increasing leverage is unnecessary and the wrong choice,” he said, adding that China has to make a choice between quantity and quality when it comes to growth.

The expert also stated that the stock market, foreign currency and real estate market should play their roles and respect the law of development, which does not guarantee economic growth. Also, when implementing policies made by the central government, shortsighted acts must be avoided. Given that the global economy still needs years to completely shake off the most recent financial crisis, China’s structural reform also has an undeniably long road ahead.

For that reason, China needs more measures that can address both the symptoms and root causes of the current economy. A strong stimulus must be avoided, or else the situation will be worse in the long term, he explained. "We should abandon the illusion of reducing leverage by loosening monetary conditions to help accelerate economic growth,” he said, calling on all departments to prepare for the potential risks of such an action. 

This article is edited and translated from 权威人士谈当前中国经济 Source: People's Daily