Print

Mail

wiki links

China still mired in debt, government report shows

Despite China's undisputed growing economic stature, the country remains mired in billions of dollars in debt that is pressuring its currency and financial system, the government said yesterday.

The fiscal hangover from China's command economy days means the yuan faces significant pressure from hidden deficits worth trillions of yuan in non-performing loans (NPLs) and unfunded pension liabilities, the ministry of commerce said.

Although China has massive foreign reserves -- US$659 billion at the end of March -- its overall fiscal deficit was huge, the ministry said in a quarterly economic assessment report of the nation, posted on its Web site.

These massive obligations would hamper efforts to keep the yuan firm in the longer term, said the ministry.

China's target deficit for this year is 300 billion yuan, down 19.83 billion yuan from last year's fiscal budget, but it is at the same time facing "trillions of yuan in non-performing assets and pension fund liabilities in the country's financial system."

The ministry did not give any specific figures but on Monday the China Banking Regulatory Commission reported that outstanding NPLs in the banking sector in the first quarter fell 3.56 billion yuan to 1.83 trillion yuan.

Central bank governor Zhou Xiaochuan (周小川) also warned this week that efforts to deepen bank reform would be tested during the next economic downturn and expressed fears that a debilitating problem with NPLs could return.

"Recently we have had a good [business] cycle, the test of the reform probably will happen in the downside cycle to see whether the NPL problem will substantially rebound or not," Zhou said.
This story has been viewed 1536 times.