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Resolving China’s Corporate Debt Problem

Author

Listed:
  • Wojciech Maliszewski
  • Mr. Serkan Arslanalp
  • Mr. John C Caparusso
  • Jose M Garrido
  • Mr. Si Guo
  • Mr. Joong S Kang
  • Mr. Waikei R Lam
  • Daniel Law
  • Wei Liao
  • Ms. Nadia Rendak
  • Mr. Philippe Wingender
  • Jiangyan Yu
  • Ms. Longmei Zhang

Abstract

Corporate credit growth in China has been excessive in recent years. This credit boom is related to the large increase in investment after the Global Financial Crisis. Investment efficiency has fallen and the financial performance of corporates has deteriorated steadily, affecting asset quality in financial institutions. The corporate debt problem should be addressed urgently with a comprehensive strategy. Key elements should include identifying companies in financial difficulties, proactively recognizing losses in the financial system, burden sharing, corporate restructuring and governance reform, hardening budget constraints, and facilitating market entry. A proactive strategy would trade off short-term economic pain for larger longer-term gain.

Suggested Citation

  • Wojciech Maliszewski & Mr. Serkan Arslanalp & Mr. John C Caparusso & Jose M Garrido & Mr. Si Guo & Mr. Joong S Kang & Mr. Waikei R Lam & Daniel Law & Wei Liao & Ms. Nadia Rendak & Mr. Philippe Wingend, 2016. "Resolving China’s Corporate Debt Problem," IMF Working Papers 2016/203, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2016/203
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    References listed on IDEAS

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    Cited by:

    1. Helmut K. Anheier & Robert Falkner & Alanna Krolikowski, 2017. "Brittle China? Economic and Political Fragility with Global Implications," Global Policy, London School of Economics and Political Science, vol. 8, pages 42-53, June.
    2. Eduardo Borensztein & Lei Sandy Ye, 2021. "Corporate debt overhang and investment in emerging economies: Firm‐level evidence," International Finance, Wiley Blackwell, vol. 24(1), pages 18-39, April.
    3. Mostak Ahamed, M. & Mallick, Sushanta K., 2017. "House of restructured assets: How do they affect bank risk in an emerging market?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 47(C), pages 1-14.
    4. Gunther Schnabl, 2019. "China's Overinvestment and International Trade Conflicts," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 27(5), pages 37-62, September.
    5. Jinjing Tian & Taining Wang & Feng Yao, 2024. "Excessive External Borrowing in China: Evidence from a Nonparametric Threshold Regression Model with Fixed Effects," Mathematics, MDPI, vol. 12(23), pages 1-28, November.

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