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Here's how President Xi Jinping is trying to prevent economic risks from 'blowing up in his face'

  • China reported stronger-than-expected economic growth data on Monday as the world's second-largest economy was supported by robust industrial output, retail sales and exports.
  • China's improving economic outlook is undoubtedly welcome news to Xi ahead of a congress for the ruling Communist Party of China in the fall.
  • "(There's) a real nervousness about deleveraging, I don't expect to see significant changes until China is forced to adapt to tighter liquidity conditions," Andrew Collier, managing director of Orient Capital Research, told CNBC Monday.

China's economy grew faster-than-expected in the second quarter of 2017 yet President Xi Jinping is likely to remain wary of risks 'blowing up in his face', Andrew Collier, managing director of Orient Capital Research, told CNBC Monday.

"The overall message is Xi Jinping is desperate to avoid what he calls 'risks in the system' and what he means by that is he doesn't want anything blowing up in his face before the party conference in the fall. That doesn't mean they're actually going to restrain credit," Collier said.

"There's a lot of stuff going on in the economy that (the government) is covering up and they can do that for this year but I don't know about 2018," he added.

China reported stronger-than-expected economic growth data on Monday as the world's second-largest economy was supported by robust industrial output, retail sales and exports. The Chinese economy grew 6.9 percent (year-on-year) in the second quarter to keep pace with the first quarter of 2017, according to the National Bureau of Statistics.

Economists polled by Reuters on average had expected 6.8 percent growth in the April to June period against the same time last year. The better-than-forecast economic data keeps Beijing on track to comfortably meet its 2017 growth target.

'Eternal theme'

Mikhail Klimentyev | TASS via Getty Images

China's improving economic outlook is undoubtedly welcome news to Xi ahead of a congress for the ruling Communist Party of China in the fall. The president is widely expected to strengthen his mandate, with the leadership eager to maintain a smooth run-up to the meeting.

Preventing systemic risk was highlighted as the "eternal theme" of the country's financial work, according to an official statement from the National Financial Work Conference on Sunday. The president also said he wanted to ensure China's central bank had a larger role in dealing with such risks in the financial system.

Over-borrowing in China has long-concerned investors though analysts have suggested action from the central bank does not appear to be forthcoming.

"(There's) a real nervousness about deleveraging, I don't expect to see significant changes until China is forced to adapt to tighter liquidity conditions," Collier added.

Despite concerns of the fallout from risks in the financial system, analysts say stability is the word of the day ahead of a once-every-five-years Communist Party Congress.

"The question that cannot yet be answered, however, is how the economy will hold up without unrelenting government intervention," Neil Mellor, senior currency strategist at Bank of New York Mellon, said in a research note.

— CNBC's Huileng Tan contributed to this report.