Banking industry under most pressure since last big write-off in 2004
China's banking industry is under the most severe operating pressure since the write-off of bad loans in 2004, a situation unlikely to change in the short term, an official from the China Banking Regulatory Commission (CBRC) said Thursday.
While the credit binge that followed the 2008 global financial crisis helped China maintain a high economic growth rate over the subsequent three to four years, banks' nonperforming loans (NPLs) began to surge in 2012 when the country's economic growth started to slow significantly, said Yu Xuejun, chairman of the CBRC's Supervisory Board for Key State-owned Financial Institutions, at the 2016 China Banking Development Forum in Beijing.
To cope with shock brought by the financial crisis in 2008, the Chinese government rolled out a 4 trillion yuan ($598.8 billion) stimulus package, causing explosive lending of more than 10 trillion yuan in 2009, according to media reports.
Bad loan pressure first started to show in East China's coastal regions in 2012 and since spread to the middle and western regions over the past three years, Yu said.
By the end of May, NPLs at China's financial institutions exceeded 2 trillion yuan, accounting for 2.15 percent of total loans, an increase of about 280 billion yuan from the beginning of this year, Yu said.
Meanwhile, there has also been an increase in the amount of loans more than 90 days delinquent, indicating the growing risk control pressure on banks.
China's commercial banks had 1.39 trillion yuan in NPLs by the end of the first quarter, according to the CBRC data in May.
However, many institutions pointed out that the official figure may understate the true scale of bad loans because a lot of loans that are 90 days past due are not recognized as NPLs.
