You are here
China's central bank chief warns about rising debt
[BEIJING] People's Bank of China Governor Zhou Xiaochuan sounded a warning over rising debt levels, saying corporate lending as a ratio to gross domestic product had become too high and the country must develop more robust capital markets.
China still has a problem with illegal fundraising and financial services are insufficient, Zhou said in a speech at the China Development Forum in Beijing on Sunday. He said the country still needs regulation to guard against excessive leverage in foreign currencies.
"Lending as a share of GDP, especially corporate lending as a share of GDP, is too high," Mr Zhou said. He said a high leverage ratio is more prone to macroeconomic risk.
Chinese leaders are struggling to balance between the meeting a target of at least 6.5 per cent average annual growth to 2020, while addressing growing debt levels. In a briefing on March 16, Premier Li Keqiang said a high corporate debt ratio "is not new in China" and China would seek to bring it down with capital-market reforms.
Corporate debt alone now stands at 160 per cent of China's GDP, according to the Organization for Economic Cooperation and Development. the group's secretary-general, Angel Gurria, said earlier in the day that sectors with especially high leverage include cement, steel, coal and flat glass, and China must address the issue. He called it a short-term risk.