China financial reform urged to offset risks

TIANJIN, Sept. 12 (Xinhua) -- China needs more reforms to liberalize interest rates and boost bond selling as the country's financial sector faces risks from piling corporate debt and an economic downswing, officials and economists proposed on Wednesday.

China's company debt remains high and is even increasing in some places, building risks for Chinese banks, a major source of company financing, said Dai Xianglong, chairman of the National Council for Social Security Fund, during the ongoing 2012 Summer Davos Forum in north China's Tianjin.

Chinese enterprises have an overall debt-asset ratio of 105.4 percent, well above the 80-percent alert line and putting them top of a 20-country ranking produced by the Chinese Academy of Social Sciences (CASS), CASS vice president Li Yang said in May.

Li Daokui, director of the Center for China in the World Economy, also sounded an alarm bell for Chinese banks, saying the lenders posed the biggest risk for the country's financial sector.

Chinese banks' total asset value was already more than twice the country's gross domestic output, said Li at a session during the forum.

Banking institutions saw their total asset value reach 122.9 trillion yuan (19.4 trillion U.S. dollars) by the end of July, according to official figures.

Meanwhile, Fang Xinghai, director-general of the Office for Financial Services under the Shanghai municipal government, warned a lot of financial risks may emerge if unforeseen circumstances cause precipitous decline in China's economic growth rate, which will be the greatest risk for the financial sector in the next five years.