Daily Management Review

China, Canada, Hong Kong are at risk of a banking crisis


China, Canada and Hong Kong are among the countries most at risk of banking crisis, Bloomberg reports with reference to the Bank for International Settlements.

Public Domain Pictures
Public Domain Pictures
Canada, whose economy grew at the highest rate since 2011, is at risk due to the high level of credit card debt of households and debt in the economy as a whole. Household debt is also seen as a risk factor for China and Hong Kong, according to a report by the Bank for International Settlements.

"Currently, the indicators point to the increase in risks in a number of countries," wrote analysts Iñaki Aldasoro, Claudio Borio and Mathias Drehmann.

Some results of the study were unexpected. Thus, analysts do not believe that Italy is at risk, despite the slow-growing economy and a large amount of "bad" debts from banks.

While experts pointed to risks for China, the key indicator - the difference between the ratio of credits to GDP and its long-term trend - showed improvement. The indicator fell to 16.7% in the third quarter of 2017, from a peak of 28.9% reached in March 2016, and was at a minimum since 2012. This may indicate that the government is making progress in its pursuit reduce risks in the financial sector.

In September 2017, the international rating agency S&P Global Ratings downgraded China's long-term sovereign credit rating for the first time since 1999, pointing to the risks associated with debt growth. In May 2017, Moody's Investors Service lowered the rating of the world's second-largest economy, citing similar concerns about debt risks in the economy and the consequences for public finances.

China intensified efforts to reduce the level of debt after the XIX Congress of the Communist Party, held in late October. Chinese President Xi Jinping said at the opening of the party congress that Beijing's measures to limit high levels of debt will continue as part of the structural reforms on the supply side.

Analysts expect that the Chinese authorities will continue to intensify their efforts this year, focusing on the debts of local governments, rising levels of debt of companies and households and working with "zombie companies," Reuters reported.

source: bloomberg.com

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