International Monetary Fund warns that China’s ever-growing debt problem poses global financial stability challenges.
“Credit growth has outpaced GDP growth, leading to a large credit overhang.”
Fund identifies three areas of “tensions” within the country’s financial sector.
China’s ballooning levels of debt and dependency on credit to fuel growth continues to pose a major financial stability threat to the global economy, and could be the catalyst for the next crisis, according to the International Monetary Fund.
The IMF report, released after the fund’s annual fact-finding mission to the world’s second largest economy, noted that while China’s political classes have taken steps to try and prevent debt levels getting out of control and improve overall financial stability in recent years, more still must be done.
“The system’s increasing complexity has sown financial stability risks,” the IMF’s assessment said.
“Credit growth has outpaced GDP growth, leading to a large credit overhang. The credit-to-GDP ratio is now about 25% above the long-term trend, very high by international standards and consistent with a high probability of financial distress.
“As a result, corporate debt has reached 165% of GDP, and household debt, while still low, has risen by 15 percentage points of GDP over the past five years and is increasingly linked …read more
Source:: Businessinsider – Finance