China's rising debt problem is considerably offset by its high saving rate, but steps need to be taken to control exceptionally high corporate liabilities, a leading government economist said on Wednesday.    

"The possibility of having a debt crisis in China is small," Li Yang, a member of Chinese Academy of Social Sciences, told a news conference. "China is a country with a high savings rate and its debt problem is mostly internal, which is totally different from countries with low savings."

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However, Li was quick to add that mounting corporate debt may derail the entire financial system if constructive steps are not taken too soon.   

"If there are problems in corporate debt, banks will have problems immediately. If banks have problems, government finances will have problems as banks are owned by the state," Li said.   

China's net debt stood at 168.5 trillion Yuan ($25 trillion) at the end of 2015, which is roughly 249 percent of China's GDP, according to Li's calculation. Earlier this week, the International Monetary Fund (IMF) urged Beijing to act promptly to control its mounting corporate debt. Global investors have also raised a red flag over China's debt problem.  

Economic experts claim that many of the economic stimulus packages announced by the Chinese government have been fuelled by debt, and this is making the debt problem worse. The state-run newspaper People's Daily quoted an "authoritative person" in May saying that China risks falling into a long-term economic recession if it unduly relies on debt-fuelled stimulus packages.   

In a bid to turnaround its sluggish economy, the Chinese government announced several stimulus packages in the current year. It is not known exactly how much money the Chinese government has put into these stimulus packages, but is believed to be running into billions of dollar.          

China is currently facing its worst economic crisis in over two decades, with most of its important economic indicators showing no sign of improvement. Economic experts say that the exceptionally high corporate debt is only adding to China's economic woes.        

Tagschina, Chinese Economy, China Corporate Debt, China debt