China Companies Need 11%-12% Nominal GDP Rises

        0709 GMT [Dow Jones] Companies in China need to see nominal GDP growth of 11% to 12% if they are "to generate sufficient cash flow to meet interest payments and avoid the onset of Ponzi-style debt dynamics," BNP Paribas says. The average interest rate paid by companies is around 6.3% for bank and more than 8% for nonbank loans. Corporate leverage is in excess of 150% of GDP, it says. To sustain this the government will need to loosen credit conditions: either lowering the repo rate through liquidity injections, cutting reserve-requirement ratios or decreasing loan-to-deposit ratios. Or weaken the yuan--putting Beijing's reform agenda on ice, BNP says. (gregor.hunter@wsj.com; Twitter: @gregorhunter)
        (END) Dow Jones Newswires

        May 21, 2014 03:10 ET (07:10 GMT)