Central Banks

Wednesday, January 29, 2020 - 15:13

MNI TRANSCRIPT: Powell on Chinese Financial Sector


WASHINGTON (MNI) - The following is the portion of a transcript from Federal Reserve Chairman Jerome Powell's press conference after the FOMC meeting Wednesday:

Q: I'd like to turn your attention back to China and the health of its financial sector, in particular. I guess I'm basing my question on reading the transcripts from 2014 that came out earlier this month. In March of that year, there was concern about the Chinese economy and one of your colleagues on the FOMC at that time asked the staff about how the Chinese Economy would hit the U.S. Economy and the staffer said that there was -- what they were worried about was not only the Chinese Economy slowing down, but there was the financial sector, and the quote was that there is a tremendous amount of dodgy loans in China. Now, I was wondering if you could give us an update on these problems in the Chinese financial sector and how you think it might impact the economy, particularly now that they've been hit by this unexpected shock.

A: Well, China has had a problem for some years, including from that period of 2014 up until, I guess 17 or 18, which was essentially just a lot of debt, for an emerging market, for an economy at the stage of evolution at the Chinese Economy, they had very high levels of debt. Not sovereign debt the way we think about it, but business debt, state-owned enterprises and private owned businesses. A couple years ago the authorities tried to stop the growth and control it, and as I mentioned, that's one of the reasons why Chinese growth slowed and one of the reasons why global growth slowed because we felt that, and they've actually stuck to that, even during this difficult period when they were experiencing strains from trade negotiations and that kind of thing. The authorities have stuck to that, and again, continued to try to do that, so to try to control the growth of debt and that's important that they do that. We don't think that there is any imminent risk there, although as you point out, the coronavirus thing is a significant thing which will have some effects on the Chinese Economy at least in the short term. The Chinese Economy is very important in the global economy now and, you know, when China's economy slows down, we do feel that. Not as much as countries though that are near China or that trade more actively with China like Western European countries. We still have 85% of our economy is domestic. We have a much smaller external sector, trade sector because of our economies, just because of our physical location.

--MNI Washington Bureau; +1 202 371 2121; email: brooke.migdon@marketnews.com

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