International institutions exaggerate China’s debt risks
June 27, 2016 Category Finance, Weekly
China’s debt situation has been exaggerated by some international institutions and its debt default risk is under control and will not pose systemic threats, according to Ruan Jianhong, Deputy Director of the Financial Survey and Statistics Department at the People’s Bank of China (PBOC). The Bank for International Settlements (BIS) said China’s overall debt was as high as 254.8% of GDP at the end of last year, but Ruan said the bank has included some factors that should not have been taken into account, thus increasing its estimate. Whatever method is used, China’s total debt load is still lower than that of some major world economies, Ruan said. Wang Kebing, Deputy Director of the Budget Department at the Ministry of Finance, said the government still has room to raise debt levels. This would help the private sector to lower its leverage, which has become the major driving force for debt piling up in recent years. Wang said the government, whose leverage is estimated to be about 39.4% of GDP, will continue to adopt a pro-active fiscal policy and increase leverage in stages. Sun Xuegong, Deputy Director of the Institute of Economics at the National Development and Reform Commission (NDRC), said China will help enterprises with short-term financial difficulties to conduct debt restructuring, excluding however “zombie enterprises” that waste resources. In the past three years, banks have written off CNY2 trillion in bad loans, the equivalent of 1.75% of bank lending, Wang Shengbang, a senior official at the China Banking Regulatory Commission (CBRC) said, as reported by the China Daily.
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