People’s Republic of China: Financial System Stability Assessment—Press Release; Staff Report; and Statement by the Executive Director for the People’s Republic of China
IMF Staff Country Reports, April 30, 2025
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- People’s Republic of China: Financial System Stability Assessment—Press Release; Staff Report; and Statement by the Executive Director for the People’s Republic of China
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Bibliographic details
- Published: April 30, 2025
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9798229009560.002
Key findings on financial sector developments and vulnerabilities
- Since the last FSAP in 2017, the authorities have made notable progress in strengthening financial supervision and regulation, continuously implementing international regulatory standards, and enhancing systemic risk monitoring.
- Regulatory reforms have produced important reductions in risks arising from non-bank financial institutions.
- Rising vulnerabilities from the property sector downturn warrant attention.
- Widening strains in highly leveraged local government financial vehicles (LGFV) warrant attention; LGFV debt poses risk.
- Declining economic growth could affect credit portfolio quality.
- Accommodative monetary policy is weakening banks’ organic profitability.
- Smaller banks—particularly those with riskier business models—are more vulnerable.
- While the authorities have taken steps to address banking system weaknesses, the current crisis management framework does not adequately support the full range of options needed to manage systemic distress.
Analytical conclusions and systemic implications
- The financial system has become more resilient through strengthened supervision, regulatory reform, and improved systemic risk monitoring.
- Significant residual vulnerabilities remain concentrated in the property sector and in LGFVs, which could transmit to the banking sector via asset quality deterioration.
- Bank profitability pressures driven by accommodative monetary policy could reduce loss-absorption capacity, with smaller and higher-risk business model banks being most exposed.
- The existing crisis management framework is inadequate to handle systemic distress across the full set of possible scenarios.
Policy recommendations and institutional priorities
- Continue enhancement of regulation and supervision to ensure regulatory frameworks remain commensurate with the scale and complexity of the financial system.
- Allocate additional resources to supervisory authorities to support ongoing regulatory strengthening.
- Further strengthen analytical capacity within authorities to monitor and assess systemic risk.
- Address banking system weaknesses with measures that strengthen crisis preparedness and expand the toolkit available under the crisis management framework.
Themes for ongoing monitoring and action
- Property sector performance and indicators of stress transmission to financial institutions.
- Financial conditions and leverage trends associated with local government financial vehicles (LGFV).
- Bank profitability metrics, especially for smaller banks and those with riskier business models.
- Effectiveness and scope of the crisis management framework in enabling systemic resolution options.
People’s Republic of China: Financial Sector Assessment Program—Financial System Stability Assessment (IMF Staff Country Report, April 30, 2025).
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