2017.10.1523:37:00UTC+00PBOC Chief Warns China Corporate Debt Too High

People's Bank of China Governor Zhou Xiaochuan cautioned that Chinese firms had taken on an alarming level of debt, and debated for less financial leverage and fiscal reforms to curb local government borrowing.

During a panel discussion at an IMF event in Washington, Zhou said the main problem was the high level of corporate debt. He said that debt servicing continues to be low, China needs to give more effort to deleveraging and solidify the policy needed for financial stability.

The PBOC head said during his presentation that China's overall debt level started to decline this year after efforts by financial authorities to curb leverage. He said that despite the decline being moderate, there was a shift in the overall trend.

He added that while the debt structure of the country is more balanced compared to common perception, it was still necessary to monitor the local government's behaviour. He said that the intergovernmental relationship among provincial, municipal and over 3, 000 country governments has created a vague system and increase price distortions for loans and debt borrowed by local government units, making transparency insufficient.

Zhou said that the government will gradually take on these issues and “sooner or later”, Beijing will need to focus more on fiscal reform.