China’s huge debts have reached dangerous levels: IMF

In a warning issued by the International Monetary Fund (IMF), it was stated that China’s huge debts have reached dangerous levels and this has raised the risk of a slowdown in the growth of the economy.
 
The IMF estimates 6.7% growth in China’s economy for this year, but the report warned that the country’s debt may increase from around 235% of gross domestic product previous year to more than 290% in 2022. The main cost of stronger growth “is further large increases in public and private debt,” it was stated by the IMF in its annual review of China’s economy.
 
“International experience suggests that China’s current credit trajectory is dangerous with increasing risks of a disruptive adjustment and/or a marked growth slowdown,” the report added. IMF expressed concern about the methods used to keep the economy expanding rapidly – a continuous funding in infrastructure and real estate that has underpinned China’s growth for years. 
 
 “China has the potential to sustain strong growth over the medium term. But to do this, China needs to accelerate its reforms to rebalance towards less credit-intensive growth while using still-sizeable buffers to smooth the transition,” the report suggested.