Credit Booms—Is China Different?

Sally Chen and Joong Kang

No 2018/002, IMF Working Papers from International Monetary Fund

Abstract: Strong Chinese output growth after the Global Financial Crisis was supported by booming credit. This credit boom carries risks. International experience suggests that China’s credit growth is on a dangerous trajectory, with increasing risks of a disruptive adjustment and/or a marked growth slowdown. Several China-specific factors—high savings, current account surplus, small external debt, and various policy buffers—can help mitigate near-term risks of a disruptive adjustment and buy time to address risks. But, if the risks are left unaddressed, these mitigating factors will likely not eliminate the eventual adjustment, but make the boom larger and last longer. Hence, decisive policy action is needed to deflate the credit boom safely.

Keywords: WP; GDP; credit boom; monetary policy; credit gap; debt overhang; sustainable growth; financial cycles; banking crises; credit growth; credit efficiency; shadow credit product; debt threshold; credit bust; credit Boomwtthout; sector credit; credit adjustment; credit intensity; LGFV debt; asset ratio; credit series; Credit; Credit booms; Financial statements; Bank credit; Global (search for similar items in EconPapers)
Pages: 22
Date: 2018-01-05
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Citations: View citations in EconPapers (7)

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