The debt, the stock market and the state-owned enterprises. The sources of chaos on the Chinese financial markets. OSW Commentary NUMBER 201/16.03.2016

Jakóbowski, Jakub (2016) The debt, the stock market and the state-owned enterprises. The sources of chaos on the Chinese financial markets. OSW Commentary NUMBER 201/16.03.2016. [Policy Paper]

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Abstract

The government’s extensive programme for stimulating the economy has enabled China to maintain high economic growth after the global financial crisis in 2008. However, this success has come at the price of a number of negative economic phenomena and the consequences they have had are the major challenge for the government today. The vast programme of investments in infrastructure, construction and fixed assets, which has been the main source of economic growth over the past few years, has caused a rapid increase in China’s debt from 158% of GDP in 2007 to 282% in 2014. Along with the local governments in charge of implementing the programme, the Chinese sector of state-owned enterprises (SOEs) has been heavily burdened by the stimulation policy. The sector’s profitability has fallen, its indebtedness has increased and management problems have been revealed.

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