China's financial policymakers are managing well and the reforms put forward by Premier Li Keqiang are essential for sustained economic growth, says Barclays CEO Antony Jenkins.
All financial crises in the banking system stem from two factors, he said Tuesday in an interview with Xinhua.
The first, is when risk is misunderstood, mispriced and mismanaged, and the second is the drying up of liquidity.
If there is mismanagement and mispricing of the risk within the system that could be addressed over time through deleveraging, the crisis can be avoided, Jenkins said during his first official visit to China as Barclays' new CEO.
Over the past two weeks, China's interbank overnight rate has reached 10 percent, compared with its normal level of around 2 percent. The People's Bank of China, the central bank, waited for several days before stepping in to backstop the banking sector.
Market analysts believe that the developments are intended policy results to press banks to deleverage and make better use of existing liquidity. The move sent a clear warning to China's financial institutions to step up efforts to contain risk.
"It seems to me that the authorities here are managing the situation well," Jenkins said.
Deleveraging, together with no stimulus and structural reform, is one of the three pillars of
Likonomics," a term coined by Huang Yiping, Barclays' chief economist in emerging Asia. The term refers to the economic policies put forward in March by Premier Li.
"It is also consistent with my own view of the state of the global economy," he said. "We are entering a period of structurally lower economic growth globally than the period that we experienced in the run-up to the crisis of 2008."
Source: Xinhua
