Summary

The International Monetary Fund (IMF) has warned that China’s financial stability is at significant risk. On December 6, the IMF released its 2017 Financial Sector Stability Assessment benchmarking the health of China’s financial sector since its last assessment in 2011. While praising China’s economic growth, the assessment found that there are many areas that China’s financial system is vulnerable to instability.

 

Background

While Western economies slumped after the 2008 global financial crisis, China continued to experience impressive levels of growth. China’s GDP has expanded by 60 percent since 2011, causing poverty rates to fall and financial inclusion to increase. China’s growth has been driven in large part by investment in manufacturing goods for export. In order to sustain its growth, China is now pivoting towards a consumer-driven, service sector-led economy.