Public-sector deleveraging goes forward during H1, report shows

Leverage in China’s State-owned sector continued to drop in the first half of 2018, while debt rates of private companies and households rose, according to a quarterly report published on Tuesday. Experts said the government will strengthen efforts to prop up the real economy and lower costs in the private sector.

The report, from the Center for the National Balance Sheet under the National Institution for Finance and Development, focused on China’s deleveraging process.

The report showed leverage in the financial sector dropped to 2014 levels, but leverage in the real economy rose from 242.1 percent to a new level of 242.7 percent, led by a rise in privatesector leverage, according to the Xinhua News Agency.

“Private companies also shed liabilities but their assets fell even more, resulting in a slightly higher leverage rate,” Tian Yun, vice president of the Beijing Economic Operation Association, told the Global Times on Wednesday.

”Household debt also rose, mainly directed toward real estate,” added Tian.

State-owned enterprises’ debtto-asset ratio fell from 65.7 percent to 65 percent in the first half, while government departments’ leverage fell from 36.2 percent to 35.3 percent.

Tian noted that monetary and fiscal policies have already shifted to help private companies withstand external shocks such as rising costs.

“The government has emphasized the need to prop up the most vulnerable parts of the economy, and we are already seeing policy changes in that direction,” said Tian.