Reducing The Amount Of Debt On The Country Of China

1549 WordsDec 12, 20167 Pages
The amount of debt issued to state-owned industries in China is escalating at levels that are not sustainable. In 2015, the debt was valued at $26.6 trillion, which is significantly higher than what it was valued only a decade ago (Schuman). When debt rises to high levels, it can cause ripple effects throughout an entire country. However, China is important on a global scale and could cause massive destruction throughout many different countries. According to Neil Shearing, a chief emerging markets economist, the debt that China incurs has accumulated too quick to keep up with. The importance of stopping the amount of debt in the country is key to preventing a crisis. Factors that need to be addressed within the country of China are the economy’s reliance on credit, slow economic growth, accounting methods used by Chinese banks, loose bank regulation and the inability of the government to continue to back the debt owed by the country. The dangers of an economy relying on credit is endless because it will affect all different parts of the economy. China’s main problem is the corporate sector because that sector is borrowing at unpreceded levels. (Schuman). The businesses that are owned by the state within the corporate sector are doing even more borrowing (Schuman). Brandon Emmerich, general manager at North America at Wind Information, says that $4 of new credit issue will only generate $1 of GDP (Schuman). China continues to provide monetary stimulus to increase output,
Open Document