China has made reform of its lumbering and uncompetitive state-owned enterprises – many in heavy industries – a priority as excess capacity and idle workers bleed what precious resources such “zombie” companies have.
Policymakers are counting on growth in the services sector to help counter the ill effects of the restructuring while weak global demand and persistent weakness in exports drag on the world’s second-largest economy.
As the economy’s old growth drivers lose momentum, the new ones are still not robust enough to substitute them, which is the biggest problem for China’s economy at present, said Huang Yiping, a member of the central bank monetary policy committee.
“Reforms should target facilitating economic restructuring and eliminating ‘old capacity’ from the market,” he told Xinhua in an interview published on Monday.
Separately, Huang also said that as more Chinese residents look overseas to diversify their investment portfolios, capital outflows will “last for a certain period”.
(Reporting by Ryan Woo; editing by David Stamp - Reuters)