China Corporate Debt Level Ratio 160% of GDP

Atradius Chief Market Officer –  Andreas Tesch Interviewed on Bloomberg TV

Baltimore, MD – May 12, 2016 – Atradius Credit Insurance's Chief Market Officer, Andreas Tesch, was recently interviewed by Bloomberg TV's Rishaad Salamat (www.bloomberg.com) highlighting the growing debt crisis in China.

 

The Bloomberg interview focused on the evolving economic challenges in China where growth is forecast to slow to 6.3% in 2016. The slowing growth comes in spite of China’s massive stimulus package which has led to overcapacity in many sectors (especially construction, steel and metals, shipping, mining, paper) and high indebtedness. 

“The global corporate debt ratio is skewed by China as the corporate debt level is 160% in relation to GDP output,” said Andreas Tesch, Chief Market Officer for Atradius Credit Insurance N.V. “This has caused a lag in payment of invoices by Chinese companies to 70 days – a 40% increase from four years ago.”

China’s economic growth slowdown accelerated in 2015. Industrial production and investment growth cooled down considerably, and are expected to decrease further in 2016, leading to a 6.3% GDP growth forecast. The challenge for the Chinese authorities is to implement reforms to reduce the vulnerabilities in the economy and to rebalance economic growth in the medium term – away from investment and export, and towards more domestic consumption, without overly slowing economic growth.

“It’s a combination of debt level and business moral which is having an impact with Chinese private business owners not getting the support from the banks they so desperately need” said Tesch “Chinese banks are very much focusing on the state-owned companies and this is where we see increased risk.”The complete interview with Atradius’ Chief Market Officer Andreas Tesch can be viewed here: http://www.bloomberg.com/news/videos/2016-05-12/just-how-bad-is-china-s-debt-problem and the Atradius Country Report that highlights current issues on China can be found here: https://group.atradius.com/publications/country-report-asia-pacific-2016-china.html