Zhou Xiaochuan, the chief of China’s major bank told that the government appreciates more savings into capital markets in order to lower China’s increased debt ratios.
Evidently, China’s high savings ratio appeared to be one of the most crucial factors behind the Asian country’s relatively high debt levels as companies count more on debt financing, making the most of bank lending and releasing bonds, while equity financing is mostly overlooked here. That’s what China’s chief banker told at a recent forum.
By the way, last year the nation’s total savings in a percentage of China’s GDP was a bit over 46%, with residents’ savings ratio at about 35%. That’s higher than 20%-30% in most countries.
There’s nothing weird in the fact that the country’s leverage ratio is so high. Nevertheless, it can become a serious problem in the nearer future.
One of the probable solutions to cut debt ratio is to boost the development of capital market. So, by simply allowing more savings into the capital market, a greater percentage of the savings is going to be employed by equity financing to lower the debt ratio.