An Attempt to Profile the Finances of China’s Enterprise Sector

Cem Karacadag and Paul Heytens

No 2001/182, IMF Working Papers from International Monetary Fund

Abstract: This paper examines the leverage, efficiency, and debt-repayment capacity of the Chinese enterprise sector using aggregate and firm level data. The cash coverage of interest expense, in particular, is used as a bridge between enterprise finances and banks' asset quality in order to develop insights on banking soundness. The interest coverage analysis corroborates the high level of nonperforming loans in the financial system. This underscores the urgency of hardening budget constraints on state-owned enterprises and stemming the flow of new bad loans by accelerating ongoing structural reforms.

Keywords: WP; public enterprise; interest; ratio; fixed asset; Chinese economy; Chinese corporate sector; Chinese financial sector; NPL ratio; negative equity; enterprise interest coverage; nonviable SOEs; coverage ratio; Nonperforming loans; Stocks; State equity participation; Bank credit; Financial sector (search for similar items in EconPapers)
Pages: 24
Date: 2001-11-01
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Citations: View citations in EconPapers (4)

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