China Will Tame Its Growing Debt Load in 3 Years, Top Xi Adviser Says

DAVOS, Switzerland — A reclusive and influential senior adviser to President Xi Jinping of China emerged here on Wednesday with a public message that many in the financial world have been eager to hear: The country has a timetable for curbing its vast appetite for debt.

Speaking to attendees at the World Economic Forum, the adviser, Liu He, said that the Chinese government planned to bring its debt under control within three years. Liu said Beijing intended to focus on reining in the growth of debt among local governments and companies.

“We have full confidence and a clear plan to get the job done,” he said.

Liu did not offer details of the government’s plans, or a specific standard by which China could be judged on whether it had achieved its goal. But his speech was the latest sign that the Chinese government would de-emphasize debt-fueled growth in the coming years and would instead sharpen its focus on solving thorny economic and social problems, including a surge in borrowing.

Over the course of about a decade, China has accumulated levels of debt that match those in the United States when compared with the overall economy. That has led to worries that the country with the world’s second-largest economy would struggle under an immense financial burden.

Other Chinese officials have made vague pledges about tackling debt before. A firm timetable from such a prominent figure, however, was likely to grab attention.

Liu is one of the most enigmatic figures in Xi’s kitchen Cabinet. He has met frequently over the years with Treasury secretaries from the United States and with other foreign officials, always privately and often away from government buildings to make clear that his role was unofficial.

In October, Liu was named to the Communist Party’s powerful Politburo. He is also widely expected to take charge of a financial stability commission created last summer that is to have broad powers to oversee domestic economic policy, including fiscal issues and financial regulation. His speech at the World Economic Forum was a rare appearance on the global stage for the Harvard-educated official.

On Wednesday, Liu also repeated pledges made by other Chinese officials about the country’s opening its markets to foreign competition in everything from financial services to cars.

There are already signs that China’s efforts to slow the rate of debt growth are working. Statistics from the Bank of International Settlements, a Swiss group owned by the world’s largest central banks, shows that corporate debt as a share of national economic output began to dip slightly early last year.

Still, economists are watching China’s debt levels closely, especially the sums accumulated by the country’s big state-run companies. Many state-run banks have accepted equity in exchange for bad debt rather than being repaid. As a result, the plan that Liu outlined on Wednesday might not fully reflect actual debt exposure in China.

Liu alluded to other financial concerns, although he provided few details. “Shadow banking and hidden debt for local governments are serious problems we have to deal with,” he said.

Liu also said that China planned to gradually reduce its tariffs on imported cars. The country has built the world’s largest auto industry behind prohibitive 25 percent tariffs on imported cars.

Beijing is reconsidering that policy as Chinese automakers gear up to become big exporters to the United States and other foreign markets that currently have low tariffs but might revisit those policies as car shipments from China rise.