China Told to Address High-Debt Problem

China needs to further address the problem of reliance on debt, which is still a big challenge amid the country’s current restructuring and rebalancing of economy, experts say.

The International Monetary Fund released its October World Economic Outlook report in Beijing on Oct 31. A forum on China’s economy was co-hosted by the IMF and the International Monetary Institute of Renmin University of China at the same time, Xinhua reported.

Compared with its earlier forecast report in April, IMF has upgraded the growth rate for the world economy to 3.7% for 2017, and to 3.8% for 2018, both up by 0.1 percentage point.

Meanwhile it upgraded China’s economic growth to 6.8% for 2017 and 6.5% for 2018, up 0.2 percentage point and 0.3 percentage point respectively from the April report.

Alfred Schipke, chief representative of the IMF in Beijing, says that China should work harder to solve the high-debt problem of its economy. Most concerning is corporate debt, which causes the high debt level and is closely linked to the financial sector.

He says reforms are required, as a large chunk of China’s debt comes from state enterprises and zombie firms. Afterwards, it is critical to make sure that credit goes to the most productive part of the economy so that companies can compete with each other on equal footing.

Xiang Songzuo, deputy director of the International Monetary Institute of Renmin University of China, says that China’s debt is at a level that all parties think is impossible to continue, and the country’s policies are very firm on deleveraging, reducing debt pressure and maintaining sustainable growth. Otherwise, it will face more pressure and loss in the future.