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China sets new rules for policy banks to avert debt crisis

China's leadership are struggling with a vast debt mountain that has seen Moody's and Standard & Poor's downgrade their sovereign ratings for the country

AFP  |  Beijing 

China sets new rules for policy banks to avert debt crisis

has set new rules to curb risks at its policy banks, stepping up oversight of the country's financial system, as looks to avert a feared debt crisis in the world's number two

For the first time, the Banking Regulatory Commission (CBRC) will impose specific rules designed in part to reduce financial risk at three banks tasked with funding Beijing's pet projects and supporting Chinese companies abroad.


The rules, released on Wednesday, included setting up mechanisms to make sure they do not lend more cash than they can afford as well as corporate governance provisions.

The new rules come as copes with ballooning debt that some analysts say threatens the stability of the Chinese

The three banks -Development Bank, Export-Import of and the Agricultural Development of -had 25 trillion yuan ($3.8 trillion) in assets at the end of September, according to state news agency Xinhua.

That makes them roughly, as large as the country's biggest state-owned bank, the Industrial and Commercial of

The special regulations will "strengthen risk control" and ensure the policy banks' "safe and stable" operations, an unnamed spokesman said on the commission's website, noting the lenders had consulted commercial banking regulations since their establishment in 1994.

The policy banks figure prominently in President Xi Jinping's signature One Belt, project that says will invest $1 trillion in and countries to revive ancient trade routes with a massive network of rail and maritime links.

Some of the projects have faced headwinds and critics say the initiative is weighing down some countries with debt they will struggle to repay.

The policy banks had directed 1.42 trillion yuan of lending to One Belt, projects as of September, according to Xinhua.

China's leadership are struggling with a vast debt mountain that has seen Moody's and Standard & Poor's downgrade their sovereign ratings for the country

Debt-fuelled has underpinned the economy's rapid growth, but there are widespread concerns that years of freewheeling credit could lead to a financial crisis with global implications.

First Published: Thu, November 16 2017. 13:25 IST
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