China’s financial regulators will allow the nation’s lenders to delay recognizing bad loans from smaller businesses reeling from the deadly coronavirus outbreak, giving temporary reprieve to trillions of RMB of debt, reported Caixin.
Qualified small- and medium-sized businesses nationwide with principal or interest due between Jan. 25 and June 30 can apply for a delay to the end of the second quarter, the China Banking and Insurance Regulatory said in a joint statement with the central bank on Sunday.
Chinese banks are taking extraordinary steps to avoid recognizing bad loans, seeking to protect themselves and cash-strapped borrowers from the economic fallout of the epidemic. Regulators told lenders not to downgrade loans with missed payments or report delinquencies to the country’s centralized credit-scoring system before the end of June, according to the statement.
The push by banks and regulators to ease the wave of debt going bad is part of a broader effort by President Xi Jinping’s government to shore up the Chinese economy, which some forecasters predict may suffer a rare quarter-on-quarter contraction to start 2020. Gross domestic product may shrink by 2.5% in the first quarter, Nomura Holdings Inc. economists led by Ting Lu said in a report on Saturday, after the country’s manufacturing sector reported record-low activity in February.