China surpasses US as world's top corporate borrower
The
Chinese mainland has surpassed the US as the world's top corporate
borrower, and higher debt risk in the world's second-largest economy may
mean greater risk for the world, a report said on Monday.
However, Chinese economists noted that the debt risk in China's corporate sector is still well under control.
Nonfinancial
corporate debt in the Chinese market was estimated at around $14.2
trillion by the end of 2013, overtaking the $13.1 trillion debt owed by
the US corporations, a progress happening sooner than expected, said a
report from the Standard & Poor's Ratings Services on Monday.
The
report expects that by the end of 2018 debt needs of mainland companies
will reach $23.9 trillion - around one-third of the almost $60 trillion
of global refinancing and new debt needs.
"It [the mainland
surpassing the US as the largest corporate borrower] is not surprising
at all, as the [size of] mainland non-service sector has already
surpassed that of the US," Tian Yun, an economist with the China Society
of Macroeconomics under the
National Development and Reform Commission, told the Global Times on Monday.
Cash
flow and leverage at mainland corporations has worsened after 2009, and
debt risks in the property and steel sectors remain a particular
concern, the report said.
Private companies are facing more
challenging financing conditions - highlighted by China's first
corporate bond default case of Shanghai Chaori Solar Energy Science and
Technology Co in March and another case of default of leading private
steel maker Shanxi Haixin Iron and Steel Group.
"The capital
market has been sluggish during the past few years, leading to the fast
growth in corporate debts," Xu Hongcai, director of the Department of
Information under the China Center for International Economic Exchanges,
told the Global Times Monday.
Experts noted that the rapid
growth in debt reflected some problems of the Chinese economy, but the
size of the debt is still in a safe range and will not cause major risks
as the economy remains stable.
"The problems of the Chinese
economy are institutional and structural," Tian said, "By addressing
these issues, debt risks can be managed."
Tian further noted that
most corporate debts in China are internal debts, thus debt problems in
the country will have limited impact on the rest of the world.
The report also said a possible contraction in "shadowing banking" will be detrimental to businesses as general.
But
Xu noted that China's tighter supervision of the "shadow banking"
sector will make it more transparent and better-regulated, which will
reduce the potential risks in the sector.
Local governments face massive debt repayment pressure
China's
local governments are facing huge debt repayment pressure this year
with 2.4 trillion yuan ($390 billion) of debts due in 2014, China
Business News reported Monday.
From 2009 to 2013, China issued 94 local government bonds raising 850 billion yuan, the report said.
With
another 400 billion yuan worth of bonds to be issued this year, the
total financing since 2009 will reach 1.25 trillion yuan, according to
the report.
However, the total local government debt is much
higher than the amount raised through the bonds, the report said, noting
that major debt came from bank loans.
Although the central
government has stated several times that the overall debt risk is under
control, the statistics from China's
National Audit Office
show that some local governments have a debt-asset ratio of more that
100 percent and are facing huge repayment pressure, the report said.
Market analysts hold the view that local governments may borrow new debts to pay for the old ones.
The
central government allowed local authorities to raise funds since 2009
in the wake of the global financial crisis, while the central government
also issued bonds and repaid debts on behalf of the local governments, a
practice criticized by some as not conforming to market economy
principles.
As the bond issuing backed by the central government
is limited and could not fully meet the local needs, the local
governments also turned to opaque financing channels including shadow
banking activities, the report said.
Despite the big debt pileup, no local government default has so far taken place.
- By Liang Fei Source:Global Times Published: 2014-6-16 23:43:09
Will the IMF headquarters move to Beijing?
The International Monetary Fund's headquarters may one day move from Washington to Beijing, aligning with China's growing influence in the world economy, the fund's managing director Christine Lagarde said early this month.
Attaching importance to China
Christine Lagarde made the statement at the London School of Economics and Political Science (LSE), saying that the IMF rules require that the institution should be headquartered in the country that is the biggest shareholder. This has always been the U.S. since the fund was formed.
"But the way things are going, I wouldn't be surprised if one of these days, the IMF was headquartered in Beijing," she said.
Lagarde remarked that the IMF had a good relationship with China, the world's second largest economy, and she praised the Chinese government's commitment to fighting corruption.
Lagarde added that she did not think the IMF should be controlled by Europeans in its first place. Since its establishment in 1945, the IMF headquarters has been headed by Europeans and located in Washington, while the World Bank has been headed by the Americans.
Not satisfied with the U.S.
Lagarde also pointed out that the U.S. government is an "outlier" among the G20 in refusing to approve IMF reform, and the IMF was trying to give emerging economies like China and Brazil a bigger voice through reform.
According to Lagarde, on the part of countries like China, Brazil, and India, there is frustration with the lack of progress in reforming the IMF by refusing to adopt the quota reform that would give emerging economies a bigger voice, a bigger vote, and a bigger share in the institution. “I share that frustration immensely,” she said.
She also claimed that the credibility and the importance of the IMF are closely related to proper representation among the membership. "We cannot have proper representation of the membership if China has a tiny share of quota and the voice, when it has grown to where it has grown," she said.
The IMF agreed to reform its management structure in 2010 so that emerging economies could play a bigger role, and made China the third largest member. The U.S. is the only member with control weight in the voting; meaning that any major reform must be approved by the United States.
Hello headquarters
Lagarde has no specific schedule for the headquarters' shift. However, this once again reminds China that there are few international organizations headquartered in its country, which is disproportionate to China's status as the world's second largest economy.
This article is edited and translated from 《IMF总部要搬北京？》，source:Beijing Youth Daily, author: Bu Xiaoming. (
People's Daily Online)
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