China Could Cause New Financial Crisis: Warn IMF

7th December 2017.

Fears that China risks being the cause of a fresh global financial crisis have been highlighted by the International Monetary Fund

In a new report by the IMF, the world’s second biggest economy has been warned that continued debt-dependency could lead to another global financial crisis.

IBF found that credit was high by international levels, that personal debt had increased in the past five years, and that the pressure to maintain the country’s rapid growth had bred an unwillingness to let struggling firms fail.

“The system’s increasing complexity has sown financial stability risks,” the IMF’s assessment said.

The report went on to condemn the country’s corporate debt, which has now reached 165% of GDP. It also strongly recommended reducing the credit amongst sectors, which should in response speed up productivity.

China was one of the prime engines of world growth when other countries were struggling during and the financial crisis of 2008, but their expansion relied heavily on higher public spending and easy credit.

“Risky lending has thus moved away from banks toward the less well-supervised parts of the financial system,” the IMF said.

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