The International Monetary Fund urged China to further address its high corporate debt levels that have resulted from the easy monetary policy put in place during the coronavirus pandemic on Tuesday, reported the South China Morning Post.
“China, of course, has re-emerged from the crisis more quickly than any other country. The measures that were taken were very quick and very effective,” said Tobias Adrian, financial counsellor at the IMF. “But the measures that were deployed have led to [a] further increase in leverage and vulnerabilities.”
China’s financial authorities, the IMF financiers said, should move away from providing easy access to capital to rein in corporate debt risks. According to an IMF report on global financial stability released on Tuesday, the vulnerabilities in China were particularly “driven by riskier corporate borrowers”.
The nation’s debt-to-GDP ratio rose to 266.4% at the end of the third quarter in 2020, up from 245.4% a year earlier, according to the Chinese Academy of Social Sciences (CASS), a State Council-affiliated think tank. It expects the ratio to hit 275% for the whole of 2020.