Chinese People's Bank Issues Warning on 'Financial Risk'

"Stock and Bond Markets Fluctuate... Real Estate Companies Face Default Crisis"

[Image source=EPA Yonhap News]

[Asia Economy Reporter Cho Hyun-ui] The People's Bank of China has issued a warning about the accumulated domestic financial crises over the past several years.

According to the US economic media CNBC on the 1st (local time), Zhou Lan, Director of the Financial Market Department of the People's Bank of China, said at a press conference that day, "The crisis includes fluctuations in the stock and bond markets and potential bond defaults of real estate companies."

Director Zhou stated, "The COVID-19 pandemic and high volatility in international capital flows have shocked the Chinese financial market," adding, "The stock, bond, and commodity markets have been repeatedly fluctuating." He said, "Some large corporations are still exposed to these risks, and small and medium-sized enterprises are facing difficulties in financing, increasing the risk of defaults."

Zhou noted that the pressure is relatively greater in some cities where the real estate market is overheated. He emphasized, "We must also watch for potential risks such as defaults by small and medium-sized real estate companies with high debt financing ratios."

China has set this year's growth target at "above 6%." Regarding this, CNBC reported, "Experts evaluated this target as demonstrating the Chinese government's ability to handle long-term issues such as accumulated debt." It reflects the Chinese government's intention to pursue stable growth while managing debt. According to a report by Allianz, as of the third quarter of last year, China's national debt-to-GDP ratio was 285%, higher than the 2016?2019 average of 251%.

The Chinese government appears to have taken the domestic market crisis seriously after some state-owned enterprises fell into default last year. CNBC explained, "It is a very rare occurrence for state-owned enterprises, which are believed to receive implicit government support from investors." However, it is struggling to curb speculation in the real estate market. According to major foreign media, new home prices in February rose at the fastest pace in five months.

Officials from the People's Bank of China said at the press conference that "monetary policy will remain stable and support the economy." CNBC reported, "However, Director Zhou did not provide specific details on solutions to the financial crisis."

This content was produced with the assistance of AI translation services.