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Resolving China’s Corporate Debt Problem
Author: Wojciech Maliszewski, Mr. Serkan Arslanalp, Mr. John C Caparussohttps://orcid.org/0000-0001-6854-6665, Jose M Garrido, Mr. Si Guo, Mr. Joong S Kang, Mr. Waikei R Lam, Daniel Law, Wei Liao, Ms. Nadia Rendak, Mr. Philippe Wingender, Jiangyan Yu, and Ms. Longmei Zhang
Series:
IMF Working Papers
Volume/Issue:
Volume 2016: Issue 203
Language:
English
Publication Date:
14 Oct 2016
DOI:
https://doi.org/10.5089/9781475545289.001
ISBN:
9781475545289
ISSN:
1018-5941
Pages:
43
Keywords:
WP; construction boom; bond market; credit growth; People's Bank of China; coverage ratio; market forces; Corporate Debt Overhang; Credit; Restructuring; Hardening Budget Constraints; credit boom; credit efficiency; credit financing; shadow credit product; Loans; Credit booms; Solvency; Government liabilities; Global
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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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.
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund