China needs financial reform, says IMF

banks are healthy, but there are vulnerabilities that should be addressed, NDTV reports.

According to Capital FM News, rampant lending since the 2008 financial crisis has left many companies and local governments in China with huge debts, while a recent slowdown in economic growth and falling property prices have fuelled fears of an explosion in defaults.

“Despite ongoing reform and financial strength, China confronts a steady build-up of financial sector vulnerabilities,” says the IMF in a Bloomberg Businessweek report.

The IMF urges banks to upgrade their risk management systems, as the central bank and regulators should add skilled personnel and disclosure standards must be raised.

BBC News says the IMF urged banks to rely more on market mechanisms, such as interest rates.

"China's banks and financial sector are healthy, but there are vulnerabilities that should be addressed by the authorities," adds Jonathan Fiechter, head of the IMF team that conducted the review.