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IMF Sounds Warning to China Over Loans to Unprofitable Firms

The International Monetary Fund on Tuesday urged China to take a more targeted approach to assessing lending risks. Photo: IC
The International Monetary Fund on Tuesday urged China to take a more targeted approach to assessing lending risks. Photo: IC

The International Monetary Fund (IMF) on Tuesday called for a targeted approach in assessing lending risks, warning that credit is still flowing to unprofitable firms in China despite government efforts to curb expansion and allow money-losing, debt-laden “zombies” to fail.

Comparing the profitability of nonfinancial firms with how much credit they receive, the report found that the quality of credit allocation declined sharply over the past 10 years for state-owned enterprises (SOEs) and those in traditional sectors such as automobiles and components, energy and raw materials.

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