WASHINGTON (Sputnik) — The IMF noted that the corporate debt in China has reached about 160 percent of the country’s GDP.
"Unless they are carefully designed and part of a sound overall framework, they [measures] could actually worsen the problem, for example, by allowing ‘zombie’ firms (non-viable firms that are still operating) to keep going," the IMF stated on Tuesday.
The level "is very high compared to other, especially developing, countries," the IMF pointed out.
The Chinese authorities have already started focusing on the problem of excessive corporate debt, which also burdens banks and the country’s economy, according to local media.
Beijing has reportedly designed two techniques to resolve the issue, including transforming non-performing loans into equity, along with securitizing and selling them.
"While such techniques can play a role in addressing these problems and have been used successfully by other countries, they are not comprehensive solutions by themselves."
On April 13, the IMF said Chinese banks could face a financial loss equal to 7 percent of the country’s GDP, because of potential inability of local firms to repay their debts.
Decelerating growth rates have plagued the Chinese economy alongside turbulent stock markets and a falling currency. China's economy grew 6.9 percent in 2015, down from 7.3 percent in 2014, amounting to the lowest annual GDP increase in 25 years.
