The return on assets of Chinese banks fell to a record low last quarter after they heeded policymakers’ calls to step up lending and sacrifice profits in order to lower borrowing costs for struggling firms. This will help shore up economic activity in the near-term but it will add to the pile of bad debt that banks had already accumulated due to their role as counter-cyclical policy tool following the Global Financial Crisis. The impact of this on financial stability will depend in large part on the government’s willingness to repay the banks for this stimulus bill by injecting capital or transferring bad debt onto its own balance sheet.
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