China: risky levels of debt says IMF

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There are recent concerns that China risk being the cause of a fresh global financial crisis. The fears have been highlighted by the International Monetary Fund (IMF) in a compelling warning about the growing debt-dependency of the worlds 2nd largest economy.

Credit was found to be high by international levels according to the IMF’s health check of China’s financial system. Following this, it also found that personal debt had risen in the past 5 years and that pressure to maintain the country’s rapid growth had initiated an unwillingness to let struggling firms fail.

The IMF has said that recent reforms by Beijing had not gone far enough, while praising the president, Xi Jinping, for his determination to improve financial security. The IMF states that “The credit-to-GDP ratio is now about 25% above the long-term trend, very high by international standards and consistent with a high probability of financial distress’.