IMF warns of China debt crisis
(7 October 2016 – China) In an update to its World Economic Outlook this week, the International Monetary Fund (IMF) warned that China's dependence on debt is growing at a "dangerous pace" and called for authorities to act to head off a brewing crisis in the world's second-largest economy.
IMF advised Beijing to fast-track vital reforms or risk a painful correction, adding that the country’s "unsustainably high" growth goals were adding to the problem.
The IMF also recommended that credit growth should be slowed while support for "unviable" state-owned enterprises stopped. The Fund’s warning follows weeks after a global central bank watchdog said the country’s banking sector could be facing an imminent debt crisis, increasing uncertainty that a collapse could send ripples across the world economy.
China's total debt hit 168.48 trillion yuan (A$33.7 trillion) at the end of last year, equivalent to 249 percent of national GDP, the Chinese Academy of Social Sciences has estimated.
Last month the Bank for International Settlements (BIS) said a gauge of Chinese debt had hit a record high in the first quarter of the year, reaching 30.1 percent.
The IMF left growth forecasts for 2016 at 6.6 percent, unchanged from July. For 2017 growth is expected to slow to 6.2 percent "absent further stimulus". Inflation is expected to rise to 2.1 percent this year and three percent over the medium term.
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