Rise in leverage level alarming: China official

This article is more than 12 months old

May 02, 2017 06:00 am

SHANGHAI China's level of leverage is rising at an "alarming pace", particularly in the finance sector, a senior central bank official said in a commentary, amid growing concern by the country's leaders over financial security.

The official Xinhua news agency yesterday cited Mr Xu Zhong, head of the People's Bank of China's research bureau, as saying China needed to deleverage at a "proper pace" to reduce financial sector debt and avoid systemic financial risk.

"China's overall leverage level is reasonable but is rising at an alarming pace, especially in the financial sector," Mr Xu said.

He added that high levels of stimulus spending from the government paired with poor corporate management and financial supervision were key factors causing rising levels of leverage.

He advised that the government should stick to "prudent and neutral" monetary policy, reduce emphasis on economic growth targets, and improve corporate governance so the authorities did not have to step in so frequently to help companies out.

"Financial security is achieved via reforms, not bailouts," Mr Xu said.