Beijing (AFP) – China’s finance minister on Wednesday brushed aside persistent concerns that the country’s ballooning debt could spark a financial crisis, stressing that debt levels are well within control.
“We are capable of ensuring there is no systemic risk,” Xiao Jie said at a press conference on the sidelines of China’s annual parliamentary session.
While he acknowledged the need for greater oversight and management of debt issuance by China’s local governments, he said total government debt was well within safe limits.
China’s total government debt as a percentage of gross domestic product fell last year, Xiao said, from 36.7 percent of GDP in 2016 to 36.2 percent in 2017.
His remarks echoed those of other Chinese policymakers who in recent months have trumpeted tackling financial risk while allowing debt to continue to grow, albeit at a slower pace.
“We’ve taken note of some international institutions making predictions left and right on this topic,” he said, before noting there were strict limits for local and central government debt levels.
Those foreign institutions include the International Monetary Fund, which has repeatedly warned of risks stemming from China’s ballooning debt and the need for deleveraging.
Since the global financial crisis in 2008, China’s overall debt as a percentage of GDP has grown more than 10 percent a year on average, according to IMF estimates, which assessed the ratio had rocketed to 234 percent of GDP by 2016.
Much of the debt is held by companies, some of which are state-owned.
Xiao did not discuss the corporate debt level during the press conference.