Hong Kong Cable TV:

We have noticed that a number of private institutions have published data that is slightly different from what we have received from the state agency. The leverage ratio has almost doubled since the 2008 financial crisis. I wonder, what do you think of that? Speaking of debt, there are some concerns and worries outside China, and two press conferences have been held this week. Is that a response to the concerns? Thank you.

Ruan Jianhong:

A number of institutions or agencies, including the BIS, have estimated that China’s debt ratio doubled, which I think is overestimated. According to their way of estimation, debt ratio is indeed increasing. I want to remind friends from press that we need to examine the general debt level and the structure of debt. For example, the BIS estimated that China’s debt ratio was 254.8% by the end of last year, but this was overstated. Most of the debt in trust and other industries are incurred within the enterprises but not factored out, thus the entire debt is high. Looking at the structure of the debt, we can see that not all sectors have heavy debt. According to the estimation of BIS, the debt level in both the government and household sectors is not high -- 44% and 39.5% respectively. Compared to their overseas counterparts, the government debt is manageable, and the debt in the household sector is lower than that in major economies. Debt in enterprises is as high as 170% according to the estimation of BIS, which registered a fast increase in recent years. On the one hand, debt in enterprises is indeed growing quickly, but on the other hand, the estimation of debt in companies is the most difficult. You may think that loans and bonds are as definite as can be, but the fact is, bond holders are very complicated, and some of the bonds are in the hands of the enterprises themselves. We will closely watch the changes in data, but we do not think that the (estimation of) debt level (by others) is well-founded. Thank you.

Xi Yanchun:

I’d like to answer the second question. The State Council Information Office has always been dedicated to providing media outlets with information, and we have done a lot of work in recent years. For example, the number of press conferences has increased significantly. We held 120 press conferences last year, in order to provide journalists with more information about China. In addition, more and more ministers have come here, and we want to invite more officials and more high-ranking members to come and interact with all of you. As to the topics of the press conference, we want to provide you with information about topics that are of top concern, for example the issue today. We received a number of faxed and telephoned questions recently from various media outlets, who said that they could not find enough information from only one department. Thus, we reached out to various departments and asked them to come together and answer your questions from different angles. All our efforts are intended for your better understanding of what happens in China right now and the accurate and objective reporting of what is going on here. If you have any other questions that others are also concerned about, we are likely to hold similar press conferences or salons. Also, if certain issues are only of the journalists’ individual concerns, we’d also be delighted to help all of them with the information they need. Now, let’s have the next question.

Reuters:

What is your estimation of the leverage ratio of state-owned enterprises (SOE)? What are you going to do next to rein in the debt risks by reforming the SOEs? What is the credit policy in industries of excess capacity? Has the rate of non-performing loans (NPL) in such industries reached a point where it is not estimated to increase? Thank you.

Xi Yanchun:

Friends from the China Banking Regulatory Commission, please answer the second question.

Wang Shengbang:

Good afternoon, friends from the media. Banking is an industry where (in the Chinese adage) great things can be done by mass efforts. Public confidence is a key foundation for the stable operation of the banking industry, and that confidence comes from the objective and fair reporting of the media. Therefore, the China Banking Regulatory Commission is always willing to interact with you openly. It is well recognized that debt has been accumulating in recent years, no matter how we estimate it. The general trend is increasing, with only slight differences in the specific rate. The downward pressure of the Chinese economy is also a reality, and so are the policies of reducing overcapacity and deleveraging. All these issues have a concrete impact on the banking sector. But in general, the operation of the banking industry is still stable and the risks are manageable.

Mr. Sun mentioned that the NPL ratio in commercial banks has been increasing in recent years, but the ratio is still lower than that of other major economies. As for industries of excess capacity, we have been closely watching and found that their NPL ratio is comparable to the general ratio in all industries. But to be fair, it is more vulnerable than other industries and will be further impacted and probably result in a higher NPL ratio if the downward pressure of the economy increases and if the PPI continues to lower.

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