China’s finance minister has said Beijing is fully confident of its capacity to avoid systemic debt risks. The remark came as international organizations including the IMF kept warning of the country’s ballooning debt.On the sidelines of the National People’s Congress, Chinese Finance Minister Xiao Jie on Wednesday brushed aside persistent concerns that the country’s high debt levels could spark a financial crisis, stressing that the situation “was under control.”
“We are capable of ensuring there is no systemic risk,” he told reporters in Beijing while acknowledging the need for greater oversight and management of debt issuance by China’s local governments.
Total government debt in the world’s second-largest economy fell from 36.7 percent of gross domestic product in 2016 to 36.2 percent in 2017, according to official statistics.
Calls for deleveraging
“We’ve taken note of some international institutions making predictions left and right on this topic,” Xiao said, adding there were strict limits for local and central government debt levels.
The International Monetary Fund has repeatedly warned of risks stemming from China’s high debt-to-GDP ratio and called for speedy deleveraging.
Much of China’s debt is held by companies, some of which are state-owned.
Earlier this week, Chinese Prime Minister Li Keqiang said preventing financial risks was one of the country’s “three fundamental battles” along with fighting poverty and pollution.
“The fundamentals of the Chinese economy remain sound, and we have many policy tools at our disposal” to address any imbalances, Li argued.
Beijing has set a fiscal deficit target of 2.6 percent of GDP for 2018, 0.4 percentage points lower than last year, signaling its resolve to reduce debt.
hg/jd (AFP, dpa)