IMF Working Papers

Credit Booms—Is China Different?

By Sally Chen, Joong S Kang

January 5, 2018

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Sally Chen, and Joong S Kang. Credit Booms—Is China Different?, (USA: International Monetary Fund, 2018) accessed September 18, 2024

Disclaimer: 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.

Summary

Strong Chinese output growth after the Global Financial Crisis was supported by booming credit. This credit boom carries risks. International experience suggests that China’s credit growth is on a dangerous trajectory, with increasing risks of a disruptive adjustment and/or a marked growth slowdown. Several China-specific factors—high savings, current account surplus, small external debt, and various policy buffers—can help mitigate near-term risks of a disruptive adjustment and buy time to address risks. But, if the risks are left unaddressed, these mitigating factors will likely not eliminate the eventual adjustment, but make the boom larger and last longer. Hence, decisive policy action is needed to deflate the credit boom safely.

Subject: Bank credit, Credit, Credit booms, Financial statements, Money, Public debt, Public financial management (PFM)

Keywords: Asset ratio, Bank credit, Banking crises, Credit, Credit adjustment, Credit boom, Credit booms, Credit Boomwtthout, Credit bust, Credit efficiency, Credit gap, Credit growth, Credit intensity, Credit series, Debt overhang, Debt threshold, Financial cycles, Financial statements, GDP, Global, LGFV debt, Monetary policy, Sector credit, Shadow credit product, Sustainable growth, WP

Publication Details

  • Pages:

    22

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2018/002

  • Stock No:

    WPIEA2018002

  • ISBN:

    9781484336762

  • ISSN:

    1018-5941