UBS: Chinese companies are getting more careful about debt

by Dramelin 12:30 AM 0 comments

UBS: Chinese companies are still searching for the `right acquisition`    3 Hours Ago | 02:12 China`s government and companies are "rationalizing" their use of debt amid concerns over growing leverage on the mainland, Eugene Qian, chairman of UBS` China strategy board, told CNBC`s "Street Signs" on Tuesday.
"Over the period of high growth, the Chinese economy and in particular the corporate sector has accumulated a large amount of debt," Qian told CNBC on the sidelines of the World Economic Forum`s "Summer Davos" event in Dalian, China.
"However, I think the way the Chinese are tackling this, both the government and I think the corporate sector, is `let`s look at the ways to rationalize,`" he said.
"Everyone seems to realize that you cannot grow purely on the back of the debt or debt burden increase.
" Qian also noted that it was "good news" that the Chinese don`t rely on external debt much, using domestic funding supported by the country`s massive savings instead.
Concerns over China`s debt load have been growing.
In a note on Monday, Nomura estimated that China`s outstanding non-financial sector debt hit 191.
96 trillion), or 251 percent of gross domestic product (GDP) in the first quarter, up from 158.
3 trillion yuan, or 231 percent of GDP, at the end of 2015.
Last month, Moody`s Investors Service expressed concern that China`s effort to support economic growth would spur higher debt levels, and the ratings service downgraded the mainland`s sovereign credit rating to A1 from Aa3, changing its outlook to stable from negative.
Moody`s estimated that while the government budget deficit in 2016 was "moderate" at around 3 percent of gross domestic product (GDP), it expected the government`s debt burden would rise toward 40 percent of GDP by 2018 and 45 percent by the end of the decade.