International Monetary Fund identifies financial risks in China

The IMF's health check of China's financial system found that credit was high by global levels, that personal debt had increased in the past five years, and that the pressure to maintain the country's rapid growth had bred an unwillingness to let struggling firms fail.

"They (IMF executive board directors) welcomed the significant steps taken by the People's Bank of China and regulatory agencies to strengthen financial sector supervision against a background of rapid financial sector growth and deepening", said the IMF in a statement after concluding the discussion of financial system stability assessment with China.

A recent International Monetary Fund report suggests china's growth-dependency posed a significant threat to the global economy. Corporate debt was now at 165 percent of GDP, the report said, while household debt had also risen quickly over the past few years.

The report comes a day after regulators in Beijing drafted new rules to strengthen bank funding and follows a number of alerts about a ballooning debt problem in the world's number-two economy. The Bank for International Settlements (BIS) - also known as the central bank of central banks - for example, warned that the Chinese banking sector could be facing an imminent blowout, raising worries about its effect on the world economy. But in order to maintain high growth rates, and protect jobs and social stability, local governments had extended credit and protected failing companies, the report said. China's "big four" banks had adequate capital, but "large, medium and city-commercial banks appear vulnerable", it said.

It added that 27 out of the 33 banks tested - three-quarters of China's banking system assets - were "undercapitalized relative to at least one of the minimum requirements".


"Implicit guarantees to SOEs [state-owned enterprises] need to be removed carefully and gradually", she said.

The Fund says better co-ordination among supervisors was essential to contain the "grave" risks posed by innovative products.

At times there had been pressure to keep struggling firms open rather than allowing them to fail - a policy that could conflict with financial stability, it added.

The IMF said China's growth has been supported by a financial system that is increasingly complex and lacks rigour.

China's central bank, the People's Bank of China, said overall a series of reports published by worldwide bodies including the IMF were "professional and valuable assessments".

Recommended News

  • Southern California wildfires force mass evacuations in Los Angeles

    Southern California wildfires force mass evacuations in Los Angeles

    Dry Santa Ana winds , blowing westward from the California desert, could reach 75 miles per hour (130 km per hour) on Thursday. The northbound and southbound lanes of the 405 Freeway, which had previously been shut, have been reopened, KCBS reported.
    Santa Maria Airport sending tankers to fight Thomas Fire

    Santa Maria Airport sending tankers to fight Thomas Fire

    They recommend anyone who is near the area, who isn't under an evacuation order, to be prepared to leave at a moment's notice. The 101 Freeway was temporarily closed in both directions between SR-126 in Ventura and SR-150 in Carpinteria.
    Louvre Abu Dhabi to exhibit 'Salvator Mundi,' the world's most expensive painting

    Louvre Abu Dhabi to exhibit 'Salvator Mundi,' the world's most expensive painting

    It is one of fewer than 20 paintings generally accepted as being from the Renaissance master's own hand, according to Christie's . Meanwhile, Salvator Mundi has had a controversial history, with one expert doubting if it is still the original work of da Vinci.
  • Some Nigerians in Libya not willing to return - minister

    He called on the United Nations to help out by sponsoring repatriation flights, provide food and health materials for the migrants.
    Jimmy Kimmel to take time off after son's second surgery

    Jimmy Kimmel to take time off after son's second surgery

    Little did McNearney or Kimmel realize, the remarks would strike quite a nerve in the public discourse as debate over health care was heating up at the same time.
    European Union  takes Czechs, Hungary, Poland to court over refugees

    European Union takes Czechs, Hungary, Poland to court over refugees

    By pursuing these countries in the EU's top court, Brussels is showing its determination to see this scheme carried out. They face heavy fines for failing to comply with any eventual ruling by the Luxembourg-based European Court of Justice.
  • Health officials: Time to get your flu shot

    Health officials: Time to get your flu shot

    Those at high-risk include: pregnant women, young children, adults 50 years and older, and people with chronic health conditions. Flu shots are available throughout Chatham-Kent from a family healthcare provider, walk-in clinic or many local pharmacies.
    Tre'Davious White calls one-game suspension for Rob Gronkowski a 'joke'

    Tre'Davious White calls one-game suspension for Rob Gronkowski a 'joke'

    He will not play for Week 14 in the Patriots' game against the Miami Dolphins. "'The whole hood want 'em, '" Clark said. Clark isn't the only one who was frustrated by the lack of response from the Bills following the hit.
    Larry Nassar receives maximum 60-year sentence by federal judge

    Larry Nassar receives maximum 60-year sentence by federal judge

    When he turned in his work laptop computer, officials said it had been wiped completely clean, including the operating system. However, it appears none will speak at Nassar's sentencing today. "At this point, he truly has nothing to lose", she said.
  • Berke tweets support for Bredesen in Senate race

    He spoke to The Associated Press on the condition of anonymity because an official announcement wasn't expected until Thursday. Bredesen is the last Democrat to win a state wide race in Tennessee when he easily won a second term as governor in 2006.
    Will this former Mississippi State standout return to the Major League Baseball ?

    Will this former Mississippi State standout return to the Major League Baseball ?

    Palmeiro, who retired quietly in September 2005 after the 10-game suspension, has always maintained that he never used steroids. If Palmeiro comes back to the MLB , he'll be the oldest player to ever play in the league.
    Parents of Tampa Serial Killer Suspect Refuse to Answer Police Questions

    Parents of Tampa Serial Killer Suspect Refuse to Answer Police Questions

    Fernandez said the couple has received death threats and feel like hostages in their home. "They feel hostages in their own home". Warren said the parents would have immunity - that nothing the Donaldson's would say could be used against them.

We are pleased to provide this opportunity to share information, experiences and observations about what's in the news.
Some of the comments may be reprinted elsewhere in the site or in the newspaper.
Thank you for taking the time to offer your thoughts.