China’s State Council has released guidelines for stricter banking regulations to try and curb risky off-balance-sheet lending in order to address the growing risks from a large rise in debt, Reuters reported, citing a report drafted late last year. Policymakers have become concerned that the country’s economy is becoming too reliant on borrowing as a way to fuel growth and that debt-fuelled investment has created overcapacity in many industries. If the guidelines are strictly implemented, it could put China’s economy on a more sustainable long-term path as it will reduce the risk of a bad-debt crisis but short-term growth would most likely fall.
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