BEIJING (AP) – China’s central bank governor said Friday the country needs to get soaring corporate debt under control but its economy and currency are stable and the decline in its foreign exchange reserves is no cause for concern.
Zhou Xiaochuan’s comments at a news conference held during China’s national legislature follows warnings a rapid rise in debt could lead to financial trouble. Beijing is trying to reduce reliance on credit and to clear away debts of state companies but private sector analysts say it needs to move faster.
“The leverage of non-financial enterprises in the whole society is too high,” said Zhou. “First of all, (debt levels of) every business, especially those with leverage that already is too high, have to be controlled.”
Zhou gave no indication he foresaw a financial crisis. But private sector analysts say China’s debt burden could drag on growth if companies have to divert money from investment to repaying debt or Beijing needs to recapitalize banks.
China has relied on repeated infusions of credit to support growth since the 2008 financial crisis. That has boosted its total debt from the equivalent of about 150 percent of annual economic output pre-crisis to more than 260 percent today.