IMF Warns of Growing Risks to China’s Financial Stability

China is in danger of stoking risks to the country’s financial stability as policies to avert a growth slowdown amid trade tensions with the U.S. undercut efforts to reduce threats to the economy stemming from high leverage, the International Monetary Fund (IMF) said in a report released Wednesday.

Regulatory tightening has slowed the buildup of risks in China’s financial sector and made it harder for weaker borrowers to obtain credit, the IMF said in its semiannual “Global Financial Stability Report,” pointing to a surge in corporate bond defaults in 2017 and 2018. These policies have contributed to a slowdown in economic growth, which is happening just as trade tensions with the U.S. are starting to bite.