FXStreet (Delhi) – Research Team at Commerzbank, suggests that since the outbreak of the financial market crisis in 2008, China’s corporate debt has rapidly soared.
Key Quotes
“We have taken a closer look at data for 2,500 firms which revealed two main causes for concern. One is that companies in sectors suffering from excess capacity and falling profit margins tend to be highly indebted. Secondly, debt levels have risen particularly rapidly in state-run enterprises, which the government evidently wants to keep afloat at any cost.
However, firms kept alive artificially will withdraw funds which would otherwise be made available to healthier businesses, thus affecting all of the economy (“zombification”). China is facing a tough time economically, and as a result the renminbi seems set to devalue further.”
(Market News Provided by FXstreet)