2017.03.2403:35:00UTC+00Fitch Says China's Policy Targets To Add Economic Imbalances

Fitch Ratings said the policy targets announced at China's National People's Congress are likely to result in a further build-up of economic imbalances, at least in the short term.

Fitch noted that the NPC, which concluded last week, appeared to confirm a partial shift in policy focus toward curbing leverage and away from supporting growth.

According to Fitch, the quantitative targets set for 2017 show that near-term growth targets are still being prioritized, at the expense of medium-term financial risks.

The government targets 'about 6.5 percent' economic growth for 2017. Leverage across the economy will continue to rise over the coming year, although Fitch expects the pace of increase to slow.

The rating agency expects China's GDP growth to remain strong at 6.3 percent in 2017.

But Fitch said efforts to keep the economy growing at its current pace would build financial risks, and could eventually put pressure on the external accounts through a narrowing of the savings-investment gap and current account balance.