Banks risk storing up trouble for future

A surge in the amount of loans issued by China's state-owned banks may be part of a plan to dilute
their non-performing loan ratios, warned Chino Doily. In the first half of 2003 they granted
Yn1,900bn in loans, more than double the amount issued in the same period last year.
Outstanding loans reached Yn14,900bn at the end of June, up 23.1 per cent year-on-year,
according to statistics from the People's Bank of China.
By lending more, the
newspaper said the banks would make NPLs account for a smaller proportion of gross
lending. China wants to list the big four state-owned banks but it first requires them to
reduce their NPL ratios and improve corporate governance.
Business Post said it
was quite common for bank branches to engage in the risky practice of lending to
enterprises simply to help them repay existing loans.