China bad loans jump as growth slows

May 17, 2014 - 12:00:00 am

BEIJING: China’s bad loans increased sharply in the first three months of the year, official data showed, with analysts saying yesterday the total was at its highest in almost three years.

Outstanding non-performing loans at Chinese banks stood at 646.1bn yuan ($103.6bn) at the end of March, up 54.1bn yuan from the beginning of the year, the China Banking Regulatory Commission (CBRC) said in a statement.

Bad loans accounted for 1.04 percent of total lending, up 0.04 percentage points from the start of January, the watchdog’s statement posted on Thursday said.

Both the outstanding value and the bad loan ratio were the highest since the second quarter of 2011, Bank of Communications economists Lian Ping and Xu Wenbing said in a research note.

“The increase in bad loans mainly came from small companies and some industries with overcapacity,” they said.

They also warned that risks in the real estate sector and local government financial vehicles were rising.

January-March marked the 10th consecutive quarter that outstanding bad loans rose, they said, adding the quarterly increase was more than double the average of recent quarters.

They expected non-performing loans to continue to grow in the coming months, with the proportion of bad loans to rise as high as 1.5 percent of total lending if economic growth was to “slow down by a large margin”.

But the CBRC said the bad loan ratio remained low and that banks’ profitability and capital adequacy ratios were “good”.

The CBRC announcement came after China released a series of economic indicators that indicated growth of the world’s second-largest economy is slowing across the board in the January-April period.