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•  Nov 11 2015 at 12:15 AM 
  

World - including China - is unprepared for China's rise

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The US may have concerns about China's behaviour but it is in everyone's interest to ensure it succeeds economically.

NaN of
[img=620x0]http://www.afr.com/content/dam/images/g/k/v/8/d/b/image.related.afrArticleLead.620x350.gkv2zq.png/1447185732071.jpg[/img]US strategy risks isolating America from its traditional allies. WPA Pool
by Lawrence Summers
For the first time in centuries, China affects the global economy as much as it is affected by the global economy. In the years ahead, China is likely to account for between one-third and one-half of growth in global incomes, trade and commodity demand, and its significance will only increase as its share of the world economy rises.
I returned last week from a trip to China with the dispiriting conclusion that the world lacks shared understandings regarding goals for the evolution of the Chinese economy, the objectives of China policy in the short and medium terms, and the institutional structures needed to manage both co-operation and inevitable tensions. Chinese President Xi Jinping has rightly called for a "new type of great-power relations." But it must be embedded in, if not a new international economic architecture, then a substantially revised and updated one.
The first issue on which clarity is required is whether it is the objective of the United States and the global community to see China succeed economically as a support for global prosperity and a driver of positive social and political change, or whether it is our objective to contain and weaken China economically so that it has less capacity to mount global threats. This is seen in Beijing as a live question and is in fact a matter of debate beyond the shrill rhetoric of protectionists and politicians. The Council on Foreign Relations, hardly a source of xenophobic or radical ideas, recently issued a report drafted by leading US diplomats condemning US efforts to build up China within the international economic order and calling for a "balancing strategy" that includes "new preferential trading arrangements . . . that consciously exclude China." No small part of the case being made by the Obama administration for the Trans-Pacific Partnership (TPP) trade deal involves the idea that it will promote competitiveness vis-a-vis China and reduce China's influence in determining global trade rules.
CO-OPERATION OR ISOLATION
[img=620x0]http://www.afr.com/content/dam/images/g/j/v/f/v/1/image.imgtype.afrArticleInline.620x0.png/1443766959689.jpg[/img]China's president Xi Jinping with US President Barack Obama, during the US visit. Bloomberg
The world cannot expect economic co-operation from Beijing if its objective is to inhibit Chinese economic performance. As Xi's rapturous recent reception in London illustrates, the United States may isolate itself from traditional allies if it does not co-operate economically with China. If Chinese economic performance deteriorates substantially, as is certainly possible, there is a risk that a balancing strategy will invite a hostile nationalist reaction. None of this is to say the United States does not have valid concerns about China's behaviour in the economic arena or to deny that these should be addressed vigorously. It is to say that our objective must continue to be mutual growth and prosperity.
Second, China faces fundamental economic policy choices in which the whole world has a great stake. It is unfortunate that difficulties with China's economic statistics, illustrated by a newly discovered 17 per cent error in estimating its coal consumption, make it difficult for observers to understand China's economy.
At a time when the Chinese economy is slowing and Chinese wealth holders desire to diversify their assets outside the country, it is incoherent to favour both financial market liberalisation, with more reliance on market forces, and exchange rate appreciation, as some in the United States do. The reforms that are necessary if China is to grow sustainably and strongly over the next decade – steps such as closing unprofitable state enterprises and limiting the ability of local governments to borrow and build on an immense scale – will surely take a toll on growth in the short run. This, in turn, will reduce demand for imports from the rest of the world and raise China's trade surplus.
Reasonable policy dialogue requires a recognition of the tensions between short- and long-term and national and global interests. The world is likely to be well-served by recognising that its deepest interests lie in China pursuing more rather than less reform, even at the expense of modest reductions in China's contribution to global demand over the next couple of years and possibly more exchange rate depreciation than we would prefer. This puts an even greater premium on the industrialised world finding an effective growth strategy based on increased public and private investment.


INAUSPICIOUS EXCLUSION
Finally, there is the question of institutional architecture. The emergence over the last year of a major Asian trade integration effort (the TPP) in which China does not participate and a major financial institution (the Asian Infrastructure Investment Bank) in which the United States does not participate is hardly auspicious. Worse, the United States' failure to provide the necessary congressional approval to allow China's voting power in the International Monetary Fund to rise above that of Belgium's suggests a troubling indifference to global reality. Forums and institutions in which both the United States and China have appropriate roles are urgently necessary if the global economy is to get back on track.
In The Economic Consequences of the Peace, John Maynard Keynes asserted the primacy of economics, observing that "the perils of the future lie not in frontiers and sovereignties but in food, coal and transport". His call for strong polices directed at promoting mutual prosperity and co-operation went unheeded, with catastrophic consequences. Today the perils of the future have much to do with China's rise and with the worlds of commerce and economics. Let us hope that we find the wisdom to manage them well.
Lawrence Summers is a professor at and past president of Harvard University. He was treasury secretary from 1999 to 2001 and an economic adviser to President Barack Obama from 2009 through 2010.
The Washington Post





The Washington Post

[greengiraffe]

How do you solve a problem like China?
Matt Clinch | @mattclinch81
10 Hours AgoCNBC.com

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4

COMMENTSJoin the Discussion

China, the greatest economic story of the last 30 years. But fears of a hard landing from years of breakneck growth have sparked fears that the country has little planned to help soften any economic blows.
The global financial crash of 2008 has dented external demand for China's goods and economists worry about high debt levels in the corporate sector. 
But is change just around the corner? Can China really rebalance its economy to be more consumer-led and open its financial markets to the world? And will optimism overcome the pessimism that has roiled global asset markets this year.
'Reforms are happening'
[url=http://www.cnbc.com/2015/11/10/pbocs-zhou-promises-capital-markets-reforms-yuan-to-be-international-by-2020.html][Image: 102086217-450807100.80x60.jpg?v=1413296407]
Top officials: China is totally committed toreform
"Reforms are happening," Wang Tao, chief China economist at UBS, told CNBC at a roundtable meeting in London on Tuesday. 
The Swiss bank isn't the most bullish on the country, predicting 6.2 percent growth next year and 5.8 percent in 2017. But, Wang Tao is adamant that it is making changes, will "not fall off a cliff" and will find a tolerance to a "gradual slowdown."
[Image: 102130196-457302160.530x298.jpg?v=1414545990]Kevin Frayer | Getty Images
Chinese commuters crowd onto a subway car on the metro during rush hour in Beijing, China.
Analysts have raised several concerns about the Chinese economy: The country is hooked on debt, the shadow banking sector has exploded. So-called "zombie" companies are yet to be weeded out. The property market is showing signs of a bubble and major industries are slowing down.
"Allowing more banks to default, will be a sign that things are moving on and markets are improving," Wang said, adding that China should "go green" and "go global."
'The potential is there'
[Image: 103098755-GettyImages-187746731.80x60.jpg?v=1445473877]
China's 'too big to fail' banks face $400B capitalcall
Bert Hofman, country director of China at the World Bank, argues that the world economy is not helping due to decreasing demand and highlights that Chinese reforms were actually underway before the 2008 crash put a cork in its progress.
"The answer (for China) is continued reforms," he told CNBC at the same roundtable event on Tuesday. "(The government needs) financial sector reforms, it needs to make the financial sector more agile."
Hofman also spoke about possible privatization of state-run enterprises, which might seem a little contradictory for a communist-led government. Nontheless, he said that these companies need to become more profitable.
"The potential is there," he said. "This was underway in the early 2000s. The banks did very well, with lots of loans to the private sector. Then came the global crash."
Both were optimistic that China would be able to implement these reforms and would refrain from "massive stimulus" to prop up the slowing of its economy. UBS predict that the yuan could depreciate 5 percent against the dollar next year but will see a long-term trend higher as more and more central banks diversify into the currency.

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http://www.valuebuddies.com/thread-5110-...#pid122247

"I believe the next five to 15 months will be a tough time for China for various reasons, of course, one, the anti-corruption will definitely have some effect," Ma said in an interview on CNBC's "Squawk on the Street."
Ma does not see a significant decline in China during that time, adding that the government's 7 percent growth target is still reachable. But even growth of 5 to 6 percent is enough so long as the country invests in the right places and producers focus on quality over quantity.
He said the Chinese economy will only be sustainable once it is "clean" and "transparent," and the next five to 15 years will be good times for the country.
Read MoreHow do you solve a problem like China?
Ma acknowledged that the economy is slowing down as the traditional growth drivers—exporting and infrastructure investment—cool off. He said Internet endeavors and e-commerce provide a way of creating new paths to growth.

[greengiraffe]

When baby formula is hard to solve





Momentous as the announcement was, the abandonment of China's one-child policy is unlikely to bring about the changes to the country's demographics that the government might hope for. For one thing, the policy - implemented in 1980 to manage scarce resources - had been eased through the years as fertility had dropped, so that by 2013, a couple could have two children if one of them was an only child. This means the new two-child policy will affect a smaller proportion of the population than it might otherwise have.

Furthermore, economic and social development in China has meant that many Chinese, particularly urban couples, are happy with just one child or even none. Rapid urbanisation has led to nuclear families, meaning less help from extended family members; a breakdown of traditional values; unaffordable urban housing and high cost of living, which have conspired to discourage child-rearing. Fewer than 1.8 million of the 11 million couples eligible to have a second child under the 2013 policy relaxation have applied for permission to do so. The number of babies born as a consequence of that policy adjustment was just 470,000, far short of the estimated two million.

The one-child policy, draconian as it was with forced abortions and sterilisation taking place despite being illegal, served the purpose of keeping the country's population down, reducing the strain on resources and giving children better opportunities in education and work. Now, there is greater awareness that a rapidly ageing population and shortage of labour will impact on economic growth and fiscal sustainability. These are gargantuan issues other countries are also facing. The proportion of retirees to workers in industrialised countries is expected to double by 2040. Consequently, as the Wall Street Journal noted, "many countries will have to face additional public spending of more than 5 per cent of gross domestic product" for healthcare, old-age support and long-term care programmes.


For China, another worrying issue is the unbalanced male to female ratio, one of the worst in the world at 115 to 100. The Chinese people's traditional preference for a male child as insurance for old age, together with the one-child policy, has led to the skewed gender ratio as couples abort female foetuses, leading to men not being able to find wives and even to trafficking in women. Such social factors make the baby conundrum a difficult one to resolve. Even if younger couples oblige by having more babies, there is a time gap of at least 15 to 20 years before their offspring start to enter the workforce. Demographic change and policy might not keep pace with each other. The cumulative impact of this will be felt keenly when the population size peaks and starts to taper - in China's case, by 2050. That is not a lot of time to prepare for social change on a massive scale.

[greengiraffe]

Free mkt at work... right prices demand and supply will match... of course, the middlemen that is relevant will be rewarded.

Anyway, China is likely to be on the track to transition for a domestic consumption based economy...

Singles Day shopping frenzy muddles China's growth debate
Robyn Mak

 
HONG KONG • China's Singles Day shopping frenzy is adding confusion to the country's growth debate.
E-commerce giant Alibaba processed transactions worth a staggering US$14.3 billion (S$20.3 billion) on Wednesday. Yet the effect on the group's annual volumes is likely to be muted.
Moreover, one day of online discounts offers few clues about Chinese consumption. Every year, thousands of brands and merchants take part in the event, which has become a nationwide shopping extravaganza.

This year, Alibaba kicked off the festival with a live-TV gala featuring appearances by James Bond actor Daniel Craig and South Korean super-idol Rain.
The hype seems to have worked: Sales volumes were 60 per cent higher than last year. Yet for all the hoopla, the activity will be little more than a blip in Alibaba's full-year numbers.
The 57 billion yuan (S$12.7 billion) worth of goods shifted last year accounted for 2.3 per cent of the full-year total. Transactions during this year's festival are equivalent to less than 7 per cent of the goods sold in the six months to September.
The US$200 billion Web giant's growth has been slowing: The value of goods sold across its platforms increased by 28 per cent to 713 billion yuan in the three months to September, the slowest pace in over three years.
Even after factoring in the boost from Singles Day, analysts at CLSA expect transactions for the quarter ending December to be no more than 29 per cent higher than the previous year.
Some macro perspective is needed too. Retail sales of consumer goods were 2.8 trillion yuan in October. So Alibaba's Nov 11 sales are equivalent to about one normal day of Chinese shopping.
Though that's impressive, the online festival is a poor guide to consumption in the People's Republic.
Singles Day promotions may be just displacing traditional brick-and-mortar retail purchases. Shoppers may also have been delaying purchases to wait for better deals.
The biggest winners of Singles Day may not be Alibaba or China's economy, but savvy bargain-hunters.
REUTERS

[CityFarmer]

An expected outcome...

China welcomes IMF backing to make yuan world reserve currency
14 Nov 2015 13:32
[BEIJING] China on Saturday welcomed backing from IMF experts that the yuan should be included in its reserve currencies, saying the move would strengthen the world's financial system.

Now the world's second-largest economy, China asked last year for the yuan to be added to the elite basket of SDR currencies, but until recently it was considered too tightly controlled to qualify.

It now looks likely the yuan will be formally admitted to the IMF's "special drawing rights" currency basket at the end of the month, which would mark a milestone in China's efforts to become a global economic power.
...
AFP

Source: Business Times Breaking News

[greengiraffe]

An expected outcome...

China welcomes IMF backing to make yuan world reserve currency
14 Nov 2015 13:32
[BEIJING] China on Saturday welcomed backing from IMF experts that the yuan should be included in its reserve currencies, saying the move would strengthen the world's financial system.

Now the world's second-largest economy, China asked last year for the yuan to be added to the elite basket of SDR currencies, but until recently it was considered too tightly controlled to qualify.

It now looks likely the yuan will be formally admitted to the IMF's "special drawing rights" currency basket at the end of the month, which would mark a milestone in China's efforts to become a global economic power.
...
AFP

Source: Business Times Breaking News

China can no longer be ignored...

[greengiraffe]

• OPINION
   
  
  
•  Nov 15 2015 at 11:54 AM 
  

Why the 'China risk' is more than a financial crisis

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NaN of
[img=620x0]http://www.afr.com/content/dam/images/g/k/q/l/f/e/image.related.afrArticleLead.620x350.gkyncq.png/1447564045848.jpg[/img]China's president Xi Jinping may have to cope with "institutional hysteresis". Getty Images
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by Alan Mitchell
As almost any Australian can tell you, the biggest "China risk" is a financial crisis and a deep recession triggered somewhere among the country's shadow banks.
But that's not the only economic danger as China struggles to achieve a soft landing.
Most of the advanced economies are still operating at levels of output far below their pre-recession trend.
That has revived interest in the problem of "hysteresis", where workers permanently leave the labour force or become unemployable, depressing the post-recession level of economic output. 
[img=620x0]http://www.afr.com/content/dam/images/g/k/z/g/9/d/image.imgtype.afrArticleInline.620x0.png/1447564010409.png[/img]AFR Graphic
And it has prompted three economists – Olivier Blanchard, the former chief economist at the International Monetary Fund, Lawrence Summers, a former US treasury secretary and adviser to President Obama, and the IMF's Eugenio Cerutti – to go back over 50 years of economic data for 23 advanced economies to see what they could learn about the consequences of recessions.
No one will be too surprised to learn that supply shocks such as the global financial crisis and the Organisation of the Petroleum Exporting Countries oil crisis caused deep recessions and reduced economic output after the recession. But these were particularly damaging events. In the case of the GFC, there had to be an extended period of balance sheet repair by banks and businesses before economic activity could get back to normal.
But common-or-garden recessions tend to be remembered as more transitory affairs – although Australians will recall how it took the best part of a decade to restore the unemployment rate to its pre-1991 recession low.
The economists found that two-thirds of all recessions were followed by lower output relative to the pre-recession trend. And in almost half of those cases, there was also lower post-recession growth. That is, the gap between the pre-recession and post-recession trends increased over time.


Even among the recessions most clearly caused by a temporary drop in demand, two-thirds of cases involved a sustained reduction in the level of output. The transient demand shocks somehow affected the supply side of economy.
China is a very different kind of economy but it is not very difficult to imagine it suffering a similar kind of problem.
The three economists suspect the real causes of many recessions in the advanced economies are likely to have been supply shocks that have both caused the recession and reduced the post-recession output and, in some cases, post-recession growth. And they point out that the causation can run in the opposite direction: the expectation of lower output or growth reduces investment and causes a recession.
DANGEROUS COMPLICATIONS

There are many dangerous complications in the Chinese situation. There has been over-investment in manufacturing, infrastructure and housing. Its export-led growth has run up against an intractably weak global recovery. The largely state-owned manufacturing sector faces major rationalisation. Spending on investment must be replaced by inherently slower-growing consumer spending and the expansion of a service sector financed by a dangerously extended finance sector.
Moreover, it has to negotiate its way through the so-called middle-income trap: the point at which the initial growth surge based on surplus rural labour and imported technology must be replaced by more sustainable growth supported by indigenous innovation.
And all of this must be managed by a political system that lives in terror of slowing growth, rising unemployment and civil unrest.
President Xi Jinping has a giant version of Malcolm Turnbull's problem. He was made leader by a political party that knows difficult economic reform is necessary and overdue, but that will turn on its reformist leadership at the first sign of political danger.

Of course, these economic challenges are overlapping and it is easy to see how China can navigate its way through. But it will be very surprising if it is a seamless transition.
In their study of the advanced economists, the economists talk about institutional hysteresis: where the recession triggers changes in regulations and institutional behaviour that affect post-recession output and even growth.
Job protection laws and excessive financial regulation are obvious examples of this.
What mistakes might a panicking Chinese communist government make even in a mild recession? A stop to reform in the state-owned sector, another round of over-investment, another layer to the mountain of debt?
Might the reformers in the government be disempowered for another half decade or more?
Super-hysteresis is the name given to the phenomenon in which growth is along with the level of output. Growth is stunted because the reallocation of resources and the investment in innovation that generate productivity growth are impeded.
That's a bad outcome for any economy, but for country trying to climb through the middle-income trap it's a potential disaster.
A lot of long-term growth projections would have to be revised, and not just in China. A large part of Asia, including Japan, has invested heavily in the Chinese supply chain, as have we.

[greengiraffe]

An expected outcome...

China welcomes IMF backing to make yuan world reserve currency
14 Nov 2015 13:32
[BEIJING] China on Saturday welcomed backing from IMF experts that the yuan should be included in its reserve currencies, saying the move would strengthen the world's financial system.

Now the world's second-largest economy, China asked last year for the yuan to be added to the elite basket of SDR currencies, but until recently it was considered too tightly controlled to qualify.

It now looks likely the yuan will be formally admitted to the IMF's "special drawing rights" currency basket at the end of the month, which would mark a milestone in China's efforts to become a global economic power.
...
AFP

Source: Business Times Breaking News

China can no longer be ignored...

Renminbi's IMF backing to spur market access
DateNovember 16, 2015 - 5:36PM

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[Image: 1444795415899.jpg]
Mark Mulligan
Senior markets and economy writer

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Special Drawing Rights for the renminbi should speed up China's global market integration, say experts. Photo: AFP

China looks set to have its renminbi anointed as an International Monetary Fund reserve currency, in a milestone for Beijing with big implications for the international monetary order.
IMF managing director Christine Lagarde at the weekend backed a staff recommendation that the currency later this month be admitted to this elite club, whose membership is limited to the US dollar, Japanese yen, euro and pound sterling.
This means the renminbi should be part of the Standard Drawing Rights or SDR system – the composition of which is reviewed every five years – by this time next year.
According to the IMF, the SDR is "neither a currency, nor a claim on the IMF". 
"Rather, it is a potential claim on the freely usable currencies of IMF members," it says. "Holders of SDRs can obtain these currencies in exchange for their SDRs in two ways: first, through the arrangement of voluntary exchanges between members; and second, by the IMF designating members with strong external positions to purchase SDRs from members with weak external positions."
The latest exchange rate, calculated at the previous allocation two months ago, is about one SDR to $US1.37.
To qualify for SDRs, a currency must be "freely usable", which does not automatically translate as "fully convertible".
The renminbi is already, according to SWIFT, the fifth most-used payment currency in the world, helped by the rapid expansion of the country's middle class and its growing use of the internet for shopping.
Last year's flotation of Alibaba, a sort of Chinese Amazon, attests to this growing trend and also has helped facilitate it. Once the company's American Depository Receipts are included in the MSCI's China index, the information technology weighting will surge from 14 per cent now to 26 per cent.
The Chinese currency is also the second most-used trade settlement unit, although the value of this falls well short of the US dollar.
As a result, the central banks of countries that do a lot of trade with China, such as Australia but including commodity exporters in Africa and Latin America, increasingly count renminbi assets – normally government bonds – among their reserves. 
The Chinese currency accounts for 1 per cent of central banks' foreign exchange reserves
Beijing now is keen to further internationalise the renminbi as it relaxes controls on foreign portfolio investment.
At present, foreigners have only a handful of channels through which to invest in China's domestic bonds and equities.
As a result, foreign ownership of China's sharemarket, via the Qualified Foreign Institutional Investor scheme and the Renminbi Qualified Foreign Institutional Investor scheme, amounted to only 1.5 per cent of the market capitalisation at the end of 2013.
Similarly, foreign investors held just 2.4 per cent of domestic government bonds in China, one of the lowest percentages among emerging markets.
According to UBS president and country head for China Dr Eugene Qian, SDR status will speed up the integration of the Chinese currency into the global financial system.
"The SDR to China and the Chinese government is an important milestone but it's not in itself the goal or objective," he said on Monday. 

"The real objective is to internationalise the renminbi, to make the Chinese financial system and the Chinese currency much more part of global finance."
In many respects, this process is well under way, starting with the People's Bank of China's willingness to let overseas trading in the currency influence more its daily fixing of the domestic renminbi.
This was most recently on show two weeks ago, when People's Bank of China lifted its reference rate for the renminbi 0.5 per cent, its biggest daily rise in more than a decade, in response to a surge in overseas trade the previous trading day.
Interest rate liberalisation is also part of this process, as is freer flow of capital in and out of the country.
In July, the People's Bank of China announced that foreign central banks, sovereign wealth funds and international financial institutions would have access to the interbank debt market, where much of China's government and corporate bonds are traded.
As the renminbi becomes easier to find and convert, China will be ready to handle bigger investment flows, and open further its capital account.
This would ultimately strengthen the currency against the greenback, says ANZ's China economics team in a note on Monday.
"As an IMF "endorsed" reserve currency, the move will likely increase the renminbi exposure of foreign portfolio managers and encourage more capital inflows, supporting the case of long-term appreciation of the renminbi," they said.
Most agree that the renminbi's inclusion in the SDR basket will also keep Beijing on the markets reform path.
"It would encourage China to stick to a much-needed financial and capital account liberalisation," says HSBC in a research note on Monday.
"These would, over time, increase financial sophistication and improve the efficiency of capital allocation, which would facilitate the economy to be more consumption  and service driven.
"It should give China confidence in making its exchange rate even more market driven, which would free up its monetary policy," the bank said.

[greengiraffe]

China story not all bad news for Australia, says RBA’s Chris Kent

• JAMES GLYNN
  
• THE AUSTRALIAN
  
• NOVEMBER 17, 2015 9:01AM
  

[b]The Reserve Bank has said that while China’s slowdown represented a risk to the local economy, the story surrounding the world’s second-largest economy wasn’t entirely a grim one as demand for services is to grow.[/b]
The RBA’s assistant governor, Chris Kent, told a business conference this morning that the recent “substantial” slowing in industrial production in China had contributed to a further decline in commodity prices over the course of this year, but that they remained high by historical standards.
“I would just add that commodity prices remain relatively high. The bank’s index of commodity prices has fallen by about 50 per cent from its peak, but is still almost 80 per cent above early 2000 levels,” Mr Kent said.
Still, the changing nature of China’s development implied that the potential for commodity prices to rise from here “is somewhat limited”.
China is Australia’s biggest export destination, particularly for iron ore.
Surging global supply and a cooling in demand from China in the last year has seen commodity prices tumble, casting a cloud over growth of the Australian economy.
The RBA has held interest rates at a record low 2 per cent since May, signalling recently that while there is scope to cut further, the economy was showing more signs of life as it transitions away from mining-led growth to other parts of the economy like services and housing construction.
Mr Kent said China’s move towards a more consumer-led economy would have benefits for Australia.
“The shift in demand towards services and agricultural products within China and the Asian region more broadly presents new opportunities for Australian exporters,” he said.
“While our comparative advantages in service industries are perhaps less obvious than they are for mineral resources, the rise in the demand for services from a large and increasingly wealthier populace in our region will no doubt be to our benefit,” Mr Kent said.
Growth in China household consumption has also been stable in recent quarters aided by the growth of new jobs, Mr Kent added.
“Of course, such outcomes cannot be taken for granted. If the industrial weakness is sustained, it might eventually affect household incomes and spending,” he said.
If China’s slowdown gathered momentum, the country had firepower to lift growth, he added.
“They have scope to provide further support if needed, although they may be reticent to do too much if that compromises longer-term goals, such as placing the financial system on a more sustainable footing,” Mr Kent said.