The possibility of “something going wrong in China” is among the biggest economic risks faced by Australia, Reserve Bank of Australia Governor Philip Lowe said on Wednesday, citing the build up of debt in world’s second largest economy, Reuters reports.
Australia now exports more to China than any other country with services exports greater than those to the United States and the United Kingdom combined, according to official data.
“A stable and robust financial system in China is clearly in Australia’s interest,” Lowe said in prepared remarks for a speech in Sydney.
“Perhaps the single biggest risk to the Chinese economy at the moment lies in the financial sector and the big run-up in debt there over the past decade.”
Recent measures by Chinese authorities and their willingness to tolerate slower economic growth provide a “strong signal” they are serious about addressing the vulnerabilities in the country’s financial system, Lowe said in the speech titled “Australia’s deepening economic relationship with China: opportunities and risks”.
“The Reserve Bank of Australia has devoted considerable resources to understanding China and its economy,” Lowe added.
“We have more staff looking at China than any other single overseas economy. This reflects not just the importance of the Chinese economy to us but also the fact that Australia and China have different political systems, different governance arrangements and different financial systems.”
The RBA also now holds 5 percent of its foreign currency reserves in yuan, he added.