The Chinese government has room to deal with rising debt levels, which has become a “serious concern,” according to Zhu Min, a deputy managing director at the International Monetary Fund.
While debt accumulation by companies and local government is “way too high,” the government has a lot of “policy buffer,” including $3.5 trillion foreign reserves, to resolve the problems, Zhu, a former deputy governor at People’s Bank of China, said at a panel during the IMF meeting in Washington yesterday. The government has already taken actions to curb borrowing, reducing the chances for an economic “hard landing,” he said.
Premier Li Keqiang said last month that China is taking “targeted measures” to address the issue of local debt, and Finance Minister Lou Jiwei has said authorities will regulate note sales to reduce credit risks. Fitch Ratings Ltd. estimates China’s total credit, including off-balance-sheet loans, swelled to 198 percent of gross domestic product in 2012 from 125 percent four years earlier, exceeding the growth seen before the banking crises in Japan in the 1990s.
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.