Peoples Republic of China: features and recent evolution of corporate debt

Ninghua Zhong and Mi Xie

Chapter 3 in The Sustainability of Asia’s Debt, 2022, pp 87-107 from Edward Elgar Publishing

Abstract: Having analyzed various datasets, including the 4 million observations of industrial firms, we describe the recent evolution of corporate debt in the People's Republic of China (PRC). Unlike in the United States, the rising total debt-to-GDP ratio in the PRC since 2008 has been driven mainly by the nonfinancial corporate sector. More importantly, we find that corporate debt in the PRC is highly "structural," with much of it concentrated in a small fraction of firms, mostly large, state-owned, and listed, while the majority of the other firms have deleveraged continuously over the decade. Remarkably, the implementation of supply-side structural reform in the PRC since 2015 has led to reduced debt ratios and improved the performance of state-owned enterprises (SOEs). Meanwhile, COVID-19 had a limited impact on deleveraging. Deepening capital market reforms to increase the firms' share of direct market financing and accelerating SOE reforms are essential to alleviate corporate debt risk in the PRC.

Keywords: Asian Studies; Development Studies; Economics and Finance (search for similar items in EconPapers)
Date: 2022
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