China is the most vulnerable country in terms of the level of debt in its financial sector, said Viral Acharya, an economics professor at New York University, on Wednesday. The capital shortfall of China's financial system is roughly 6% of its gross domestic product, he said at a seminar on the sideline of the IMF/World Bank spring meeting. With slowing growth and slowing home prices, it is uncertain if China will be able to manage the problem, Acharya said. "It is not clear whether there can be a safe landing here," he said. The debt is held by state-owned banks so there is some chance of a quicker recapitalization than if the debt was held by the private sector, but that remains to be seen, he said.
Copyright © 2015 MarketWatch, Inc.
Continue Reading Below