Rising debt troubles China

People’s Bank of China governor Zhou Xiaochuan sounded a warning over rising debt levels, saying corporate lending as a ratio to gross domestic product had become too high and the country must develop more robust capital markets.

“Lending as a share of GDP, especially corporate lending as a share of GDP, is too high,” Mr Zhou said.

He said a high leverage ratio is more prone to macroeconomic risk. Chinese leaders are struggling to balance between meeting a target of at least 6.5% average annual growth to 2020, while addressing growing debt levels.

Corporate debt alone now stands at 160% of China’s GDP. Zhou spoke at the three-day forum, where some of the world’s best-known executives - including Facebook’s Mark Zuckerberg, UBS Group’s Sergio Ermotti and IBM’s Ginni Rometty - attended.

The Chinese leadership’s message overall was that it would press ahead with necessary structural reforms even as growth slows.

“That transition is going to be good for China and is going to be good for the world,” IMF managing director Christine Lagarde said. China’s yuan has declined 4.5% since a surprise devaluation in August spooked global investors and spurred capital outflows.

The concern over bad debt is extending to China's highest echelons https://t.co/p6Ky8ltohH pic.twitter.com/D2Mwlg3kmK

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