Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/203374 
Year of Publication: 
2018
Series/Report no.: 
ADB Economics Working Paper Series No. 534
Publisher: 
Asian Development Bank (ADB), Manila
Abstract: 
We reflect state-owned enterprises' (SOE) leverage within the standard debt sustainability assessment framework. Based on company data and the interest coverage ratio as a measure of debt at risk, aggregate baseline projections and fan charts gauge SOE debt as a contingent liability to the public sector. We find that SOE leverage in the People's Republic of China has grown to a large liability that deserves the urgent attention it has been receiving from the authorities. While there is no room for complacency, there is no need for panic either; even if authorities had to step into mop up as much as 20% of SOE debt at risk gone bad, this would appear to be manageable at roughly 2.7% of the gross domestic product in 2016 or 5.5% by 2021. These findings are reflective of discretionary assumptions about future developments in the SOE sector and the broader economy - including baseline conditions premised on preventive government action to slow borrowing - that are adjustable to reflect analysts' prerogatives and expectations.
Subjects: 
contingent liabilities
corporate leverage
People's Republic of China
public debt sustainability
state-owned enterprises
JEL: 
G01
G21
H30
H60
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Working Paper

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