IDEAS home Printed from https://ideas.repec.org/p/imf/imfwpa/2015-072.html
   My bibliography  Save this paper

Assessing China’s Corporate Sector Vulnerabilities

Author

Listed:
  • Miss Mali Chivakul
  • Mr. Waikei R Lam

Abstract

This paper documents and assesses the risk stemming from rising corporate indebtedness in China using a firm-level dataset of listed firms. It finds that while leverage on average is not high, there is a fat tail of highly leveraged firms accounting for a significant share of total corporate debt, mainly concentrated in the real estate and construction sector and state-owned enterprises in general. The real estate and construction firms tend to face lower borrowing costs and could withstand a modest increase of interest rate shocks despite their high leverage. The corporate sector is however vulnerable to a significant slowdown in the real estate and construction sector. Our sensitivity analysis suggests that the share of debt that would be in financial distress would rise to about a quarter of total listed firm debt in the event of a 20 percent decline in real estate and construction profits.

Suggested Citation

  • Miss Mali Chivakul & Mr. Waikei R Lam, 2015. "Assessing China’s Corporate Sector Vulnerabilities," IMF Working Papers 2015/072, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2015/072
    as

    Download full text from publisher

    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=42819
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Wenlang Zhang & Gaofeng Han & Steven Chan, 2014. "How Strong are the Linkages between Real Estate and Other Sectors in China?," Working Papers 112014, Hong Kong Institute for Monetary Research.
    2. International Monetary Fund, 2014. "Republic of Kazakhstan: Staff Report for the 2014 Article IV Consultation," IMF Staff Country Reports 2014/242, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Zhang, Min & Zhang, Yahong, 2022. "Monetary stimulus policy in China: The bank credit channel," China Economic Review, Elsevier, vol. 74(C).
    2. Sun, Lixin, 2016. "Corporate Deleveraging and Macroeconomic Policies: Evidence from China," MPRA Paper 69140, University Library of Munich, Germany.
    3. Michael, Bryane & Zhao, Simon, 2016. "Bubble Economics How Big a Shock to China’s Real Estate Sector Will Throw the Country into Recession, and Why Does It Matter?," EconStor Preprints 141314, ZBW - Leibniz Information Centre for Economics.
    4. repec:zbw:bofitp:2018_001 is not listed on IDEAS
    5. Song, Zheng (Michael) & Xiong, Wei, 2018. "Risks in China’s financial system," BOFIT Discussion Papers 1/2018, Bank of Finland, Institute for Economies in Transition.
    6. Dieppe, Alistair & Gilhooly, Robert & Han, Jenny & Korhonen, Iikka & Lodge, David, 2018. "The transition of China to sustainable growth – implications for the global economy and the euro area," Occasional Paper Series 206, European Central Bank.
    7. Snehal S Herwadkar, 2017. "Corporate leverage in EMEs: did the global financial crisis change the determinants?," BIS Working Papers 681, Bank for International Settlements.
    8. Chris Read, 2017. "Conditions in China’s Listed Corporate Sector," RBA Bulletin (Print copy discontinued), Reserve Bank of Australia, pages 67-74, June.
    9. International Monetary Fund, 2016. "Ireland: Financial Sector Assessment Program: Technical Note-Nonbank Sector Stability Analyses," IMF Staff Country Reports 2016/317, International Monetary Fund.
    10. Nir Klein, 2016. "Corporate Sector Vulnerabilities in Ireland," IMF Working Papers 2016/211, International Monetary Fund.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Li-Gang Liu, 2014. "Is China's Property Market Heading toward Collapse?," Policy Briefs PB14-21, Peterson Institute for International Economics.
    2. Daniel Law & Mr. Shaun K. Roache, 2015. "Assessing Default Risks for Chinese Firms: A Lost Cause?," IMF Working Papers 2015/140, International Monetary Fund.
    3. Yang, Ginny, 2017. "Prominent Economists’ Views: China’s Exchange Rate—Fixed or Floating?," Studies in Applied Economics 82, The Johns Hopkins Institute for Applied Economics, Global Health, and the Study of Business Enterprise.
    4. Yubin Huangfu & Haibo Yu & Zuoji Dong & Yingman Wang, 2024. "Research on the Risk Spillover among the Real Economy, Real Estate Market, and Financial System: Evidence from China," Land, MDPI, vol. 13(6), pages 1-26, June.
    5. Oliver Falck & Siegfried Schönherr, 2016. "An Economic Reform Agenda for Croatia: a comprehensive economic reform package prepared for the Croatian Statehood Foundation," ifo Forschungsberichte, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 70.
    6. Sara B. Alnashar, 2017. "Egypt’s Government Spending Multiplier: Its Size and Determinants," Working Papers 1165, Economic Research Forum, revised 12 2017.
    7. Mr. Waikei R Lam & Xiaoguang Liu & Mr. Alfred Schipke, 2015. "China’s Labor Market in the “New Normal”," IMF Working Papers 2015/151, International Monetary Fund.
    8. Mark Kruger & Kun Mo & Benjamin Sawatzky, 2016. "The Evolution of the Chinese Housing Market and Its Impact on Base Metal Prices," Discussion Papers 16-7, Bank of Canada.
    9. Yang, Jian & Yu, Ziliang & Deng, Yongheng, 2018. "Housing price spillovers in China: A high-dimensional generalized VAR approach," Regional Science and Urban Economics, Elsevier, vol. 68(C), pages 98-114.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:imf:imfwpa:2015/072. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Akshay Modi (email available below). General contact details of provider: https://edirc.repec.org/data/imfffus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.