Resolving China’s Corporate Debt Problem
October 14, 2016
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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
Pages:
43
Volume:
2016
DOI:
Issue:
203
Series:
Working Paper No. 2016/203
Stock No:
WPIEA2016203
ISBN:
9781475545289
ISSN:
1018-5941
