The International Monetary Fund said on Wednesday that corporate China's balance sheets have deteriorated to the point that some US$1.3 trillion in borrowings is at risk of default.
The IMF says the financial health of Chinese companies has declined as
profitability has sunk amid slower economic growth. (AFP Photo)
WASHINGTON: The International Monetary Fund said on
Wednesday (Apr 13) that corporate China's balance sheets have
deteriorated to the point that some US$1.3 trillion in borrowings is at
risk of default.
It said that the financial health of Chinese companies has declined
as profitability has sunk amid slower economic growth, and there is
clear evidence that more companies are not earning enough to cover the
interest owed on borrowings.
Such "debt at risk" has risen to 14 per cent of all debt at
listed Chinese companies, triple the level of 2010, the IMF said in its
Global Financial Stability Report. That means that bank loans at risk
amount to nearly US$1.3 trillion, it said.
"These loans could translate into potential bank losses of
approximately 7 per cent of GDP." The IMF said that, given the buffers
Beijing has built up for its banks, and still-strong economic growth,
the huge number is recognised by authorities and is "manageable."
Even so, it added, "the magnitude of these vulnerabilities
calls for an ambitious policy agenda." The IMF said Beijing needs to
address the massive corporate debt overhang and further strengthen
financial institutions.
- AFP/de
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