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August 31, 2016

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China’s ‘Big Four’ lenders record rising bad loans

ALL of China’s “Big Four” state-owned banks reported mounting bad loans in the first half of the year, statements showed, as the world’s second-largest economy faces souring debt amid slowing growth.

The Industrial and Commercial Bank of China, the world’s biggest lender by assets, said its non-performing loan ratio rose to 1.55 percent at the end of June, up from 1.5 percent at the end of last year, said a statement to the Hong Kong stock exchange filed yesterday.

Still its net profit for the first six months edged up 0.8 percent annually to 150.66 billion yuan (US$22.6 billion), it said.

China’s three other giant state-owned banks have reported similar results in recent days, with all of their bad loan ratios creeping upwards as Beijing seeks to boost the world’s second-largest economy with an infusion of cheap credit.

Analysts have warned that a debt-fueled rebound might be short-lived and ballooning borrowings risk sparking a financial crisis as bad loans and bond defaults increase.

Bank of China’s earnings statement yesterday showed its NPL ratio rising to 1.47 at the end of June, up from 1.43 in December.

Last week the country’s number two lender, the China Construction Bank, said its NPL ratio had risen 0.05 percentage point to 1.63 percent, while the Agricultural Bank of China reported a figure of 2.4 percent, slightly higher than last year.

China’s total debt hit 168.48 trillion yuan at the end of last year, equivalent to 249 percent of national GDP, top government think tank the China Academy of Social Sciences has estimated.

Authorities have unveiled policies intended to tackle the problem of souring loans, including debt-for-equity swaps. But some analysts fear this would simply extend life support to debt-saddled “zombie” companies that are weighing down the economy.

Earlier this summer an official with China’s banking regulator said Chinese banks had written off over US$300 billion of bad loans in the past three years.


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