HONG KONG Oct 18 China's credit growth has been
"very fast" by global standards and without a comprehensive
strategy to tackle the debt overhang, there's growing risk it
will have a banking crisis or sharply slower growth or both, the
International Monetary Fund said.
In a working paper, the IMF said Beijing should act quickly
before the problem becomes systemic, and that the problems of
both creditors and debtors needed to be addressed
The paper is one of multiple warnings the IMF has made about
the Chinese economy this year.
The fund has projected the world's second-largest economy
would grow 6.6 percent in 2016, but said expansion would
gradually slow to around 5.8 percent in 2021.
Corporate China is sitting on $18 trillion in debt,
equivalent to about 169 percent of the country's gross domestic
Rating agency S&P Global has estimated China's banks will
need as much as $1.7 trillion in capital to cover a likely surge
in bad loans.
In its paper dated Oct 14, the IMF said "Just cleaning up
the banks by moving bad loans off bank balance sheet and
recapitalizing the banks, or allowing companies to go bankrupt
without recapitalizing banks would not revitalise economic
It said that so far, authorities had failed to implement a
full-fledged strategy as China's approach involved mainly
handling the "overcapacity problem, with less discussion of
On Tuesday, China's central bank said Chinese banks
extended 1.22 trillion yuan ($181.3 billion) in new loans in
September, a three-month high and well above expectations, while
money supply growth edged up.
($1 = 6.73 Chinese yuan)
(Reporting by Umesh Desai; Editing by Richard Borsuk)