Recent data suggests that Chinese debt increased further in the first quarter of 2020, as the Covid-19 shock is pushing public and private borrowing even higher.
Several institutions, including the International Monetary Fund, raised concerns prior to the Covid-19 outbreak on the risks high levels of Chinese debt could pose to global financial stability. The Covid-19 shock is likely to exacerbate these risks.
In its interim Financial Stability Report published on 7 May 2020, the Bank of England’s Financial Policy Committee found that major UK banks should remain resilient to the Covid-19 shock to both UK and global economies, including China. HMT will continue to work alongside both the Bank of England and global institutions in monitoring the risks posed by Chinese indebtedness.