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Risks to China from 'very fast' credit growth rising rapidly: IMF

Corporate China is sitting on $18 trillion in debt, equivalent to about 169 per cent of the country's gross domestic product

Reuters  |  Hong Kong 

Risks to China from 'very fast' credit growth rising rapidly: IMF

China's credit growth has been "very fast" by global standards and without a comprehensive strategy to tackle the debt overhang, there's growing risk it will have a banking crisis or sharply slower growth or both, the International Monetary Fund said.

In a working paper, the said Beijing should act quickly before the problem becomes systemic, and that the problems of both creditors and debtors needed to be addressed simultaneously.

The paper is one of multiple warnings the has made about the Chinese economy this year.

The fund has projected the world's second-largest economy would grow 6.6 per cent in 2016, but said expansion would gradually slow to around 5.8 per cent in 2021. 

Corporate is sitting on $18 trillion in debt, equivalent to about 169 per cent of the country's gross domestic product.

Rating agency Global has estimated China's banks will need as much as $1.7 trillion in capital to cover a likely surge in bad loans.

In its paper dated October 14, the said "Just cleaning up the banks by moving bad loans off bank balance sheet and recapitalising the banks, or allowing companies to go bankrupt without recapitalising banks would not revitalise economic activity."

It said that so far, authorities had failed to implement a full-fledged strategy as China's approach involved mainly handling the "overcapacity problem, with less discussion of financial implications".

On Tuesday, China's central bank said Chinese banks extended 1.22 trillion yuan ($181.3 billion) in new loans in September, a three-month high and well above expectations, while money supply growth edged up. 

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Risks to China from 'very fast' credit growth rising rapidly: IMF

Corporate China is sitting on $18 trillion in debt, equivalent to about 169 per cent of the country's gross domestic product

Corporate China is sitting on $18 trillion in debt, equivalent to about 169 per cent of the country's gross domestic product
China's credit growth has been "very fast" by global standards and without a comprehensive strategy to tackle the debt overhang, there's growing risk it will have a banking crisis or sharply slower growth or both, the International Monetary Fund said.

In a working paper, the said Beijing should act quickly before the problem becomes systemic, and that the problems of both creditors and debtors needed to be addressed simultaneously.

The paper is one of multiple warnings the has made about the Chinese economy this year.

The fund has projected the world's second-largest economy would grow 6.6 per cent in 2016, but said expansion would gradually slow to around 5.8 per cent in 2021. 

Corporate is sitting on $18 trillion in debt, equivalent to about 169 per cent of the country's gross domestic product.

Rating agency Global has estimated China's banks will need as much as $1.7 trillion in capital to cover a likely surge in bad loans.

In its paper dated October 14, the said "Just cleaning up the banks by moving bad loans off bank balance sheet and recapitalising the banks, or allowing companies to go bankrupt without recapitalising banks would not revitalise economic activity."

It said that so far, authorities had failed to implement a full-fledged strategy as China's approach involved mainly handling the "overcapacity problem, with less discussion of financial implications".

On Tuesday, China's central bank said Chinese banks extended 1.22 trillion yuan ($181.3 billion) in new loans in September, a three-month high and well above expectations, while money supply growth edged up. 
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Business Standard
177 22

Risks to China from 'very fast' credit growth rising rapidly: IMF

Corporate China is sitting on $18 trillion in debt, equivalent to about 169 per cent of the country's gross domestic product

China's credit growth has been "very fast" by global standards and without a comprehensive strategy to tackle the debt overhang, there's growing risk it will have a banking crisis or sharply slower growth or both, the International Monetary Fund said.

In a working paper, the said Beijing should act quickly before the problem becomes systemic, and that the problems of both creditors and debtors needed to be addressed simultaneously.

The paper is one of multiple warnings the has made about the Chinese economy this year.

The fund has projected the world's second-largest economy would grow 6.6 per cent in 2016, but said expansion would gradually slow to around 5.8 per cent in 2021. 

Corporate is sitting on $18 trillion in debt, equivalent to about 169 per cent of the country's gross domestic product.

Rating agency Global has estimated China's banks will need as much as $1.7 trillion in capital to cover a likely surge in bad loans.

In its paper dated October 14, the said "Just cleaning up the banks by moving bad loans off bank balance sheet and recapitalising the banks, or allowing companies to go bankrupt without recapitalising banks would not revitalise economic activity."

It said that so far, authorities had failed to implement a full-fledged strategy as China's approach involved mainly handling the "overcapacity problem, with less discussion of financial implications".

On Tuesday, China's central bank said Chinese banks extended 1.22 trillion yuan ($181.3 billion) in new loans in September, a three-month high and well above expectations, while money supply growth edged up. 

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Business Standard
177 22

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