Comments from International Monetary Fund (IMF) are crossing the wires via LiveSquawk and theGuardian -
- China should put less emphasis on targets for growth.
- The system’s increasing complexity has sown financial stability risks.
- Credit growth has outpaced GDP growth, leading to a large credit overhang.
- The credit-to-GDP ratio is now about 25% above the long-term trend, very high by international standards and consistent with a high probability of financial distress.
- As a result, corporate debt has reached 165% of GDP, and household debt, while still low, has risen by 15 percentage points of GDP over the past five years and is increasingly linked to asset-price speculation. The buildup of credit in traditional sectors has gone hand-in-hand with a slowdown in productivity growth and pressures on asset quality.
- China should form a financial stability sub-committee.
- China's regulators should reinforce the primacy of financial stability over development goals.
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