Commercial banks’ non-performing loans (NPL) rose by RMB183bn in Q2, the biggest increase in over a decade. On paper, bad loans now make up just under 2% of all loans, the highest ratio since the Global Financial Crisis. The official NPL ratio still looks implausibly low but the latest rise does suggest, alongside a recent jump in corporate bond defaults, that slowing growth is putting strain on corporate balance sheets. What’s more, the NPL ratio would have risen by a wider margin if banks hadn’t stepped up their efforts to offload their bad loans. NPL securitisation has led to a jump in banks’ issuance of asset-backed securities recently and new data made available by the People’s Bank this week show that banks have written-off RMB1.2tn worth of NPLs since the start of 2017, more than 1.1% of current outstanding loans.
Become a client to read more
This is premium content that requires an active Capital Economics subscription to view.
Already have an account?
You may already have access to this premium content as part of a paid subscription.
Sign in to read the content in full or get details of how you can access it
Register for free
Sign up for a free account to gain:
- Unlock additional content
- Register for Capital Economics events
- Receive email updates and economist-curated newsletters
- Request a free trial of our services