China to expand list of companies “too big to fail”

The number of Chinese firms considered systemically crucial to economic stability is set to increase, a sign that the government is considering worse-case scenarios as debt levels continues to bulge, sources told Bloomberg.

The shortlist of new additions is likely to include China’s largest lenders, insurers and brokerage firms, the sources said. Approved companies will then face tighter regulatory oversight from Beijing and adhere to more stringent capital requirements.

There are estimated to be around 20 companies already deemed “too big to fail,” according to the sources.

China’s rapid, debt-fueled growth in recent years has inflated its financial sector and raised concerns about sustainability. Total debt hit 266% of GDP at the end of 2017, but so far efforts to defuse financial risk have focused on shadow banking rather than contagion to major institutions.