China to act on growing bad loans
(25 October 2016 – China) More than a dozen Chinese government agencies will be coming together for a series of meetings to deal with expanding levels of corporate debt.
The agencies include the central bank, the Finance Ministry, the banking regulator, the Communist Party’s propaganda department, the labour ministry, the Commerce Ministry, the state assets watchdog and the Supreme Court.
Although a clear timeline hasn’t been provided, the meetings are expected to address the estimated US$18 billion (A$23.7 billion) in corporate debt, in part through arranging debt-to-equity swaps and coordinating the policy response at the local level, official from the State Council said in a statement.
The announcement follows government reports of a 6.7 percent growth in the country’s economy in the third quarter.
The country’s leadership under President Xi Jinping has sought to build sustainable growth in to the economy, via deleveraging and capacity cuts, however, they have seen little progress. Chinese banks have not reduced their business lending while “zombie” firm, which are propped up by local governments are protected from bankruptcy.
Despite government reassurance of no-bailouts, analysts suggest that an economy who relies heavily on a mix of local government, state-owned enterprises and state banks would not cope without heavy government intervention should it face server headwinds.
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