Resolving China’s Corporate Debt Problem

By Wojciech Maliszewski, Serkan Arslanalp, John C Caparusso, Jose M Garrido, Si Guo, Joong S Kang, Waikei R Lam, Daniel Law, Wei Liao, Nadia Rendak, Philippe Wingender, Jiangyan Yu, Longmei Zhang

October 14, 2016

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Wojciech Maliszewski, Serkan Arslanalp, John C Caparusso, Jose M Garrido, Si Guo, Joong S Kang, Waikei R Lam, Daniel Law, Wei Liao, Nadia Rendak, Philippe Wingender, Jiangyan Yu, and Longmei Zhang. Resolving China’s Corporate Debt Problem, (USA: International Monetary Fund, 2016) accessed November 12, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Corporate credit growth in China has been excessive in recent years. This credit boom is related to the large increase in investment after the Global Financial Crisis. Investment efficiency has fallen and the financial performance of corporates has deteriorated steadily, affecting asset quality in financial institutions. The corporate debt problem should be addressed urgently with a comprehensive strategy. Key elements should include identifying companies in financial difficulties, proactively recognizing losses in the financial system, burden sharing, corporate restructuring and governance reform, hardening budget constraints, and facilitating market entry. A proactive strategy would trade off short-term economic pain for larger longer-term gain.

Subject: Banking, Credit, Credit booms, Financial institutions, Financial sector policy and analysis, Government liabilities, Loans, Money, Public financial management (PFM), Solvency

Keywords: Bond market, Construction boom, Corporate Debt Overhang, Coverage ratio, Credit, Credit boom, Credit booms, Credit efficiency, Credit financing, Credit growth, Global, Government liabilities, Hardening Budget Constraints, Loans, Market forces, People's Bank of China, Restructuring, Shadow credit product, Solvency, WP

Publication Details

Pages:

43
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2016/203
Stock No:

WPIEA2016203
ISBN:

9781475545289
ISSN:

1018-5941

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