200% Chinese credit growth in less than 10 years is dangerous: IMF

The Dollar Business Bureau

A Chinese surge in credit growth has found mention as a concern in the IMF's Global Financial Stability Report. Although China is a major contributor to global growth, its credit growth vis-a-vis its economy has more than doubled to 200% in less than ten years.

IMF's Financial Counsellor and Director for Monetary and Capital Markets department, Tobias Adrian averred that such credit growths were dangerous. He was quoted in a press briefing as saying that Chinese policies that limit the growth of banking systems could reduce credit growth and thereby global financial vulnerabilities too. But, there was still more that was needed to be done to achieve a global financial stability.

Matthew Jones, Assistant Director at the IMF added that some of the domestic challenges that China faced were manageable but needed urgent action to ensure reducing the rapid credit growth.

The report also put in perspective external triggers such as trade protectionism and such issues leading to tightening of financial conditions in China. The IMF however suggested that the Chinese economy had sufficient buffers to deal with such global financial conditions.

The Global Financial Stability Report also pointed out that UK was a key player in the global financial capital system, and the Brexit and its negotiations would impact concentration of capital, risk management and financial services. "Banks may be most affected by the potential loss of passporting access and they may need to relocate some activities," said Jones, sharing an instance.