China Economic Review

Chinese banks’ bad loans grow at record pace in second quarter

Chinese banks held a record number of non-performing loans in the second quarter of 2018, according to the latest data from the China Banking and Insurance Regulatory Commission, despite the ongoing pressure from Beijing to deleverage.

Bad loans jumped by Rmb 183 billion ($26.6 billion) to total Rmb 1.96 trillion at the end of June, the largest quarterly increase in over a decade. Failed loans made up 1.86% of total advances, said the commission.

As Bloomberg notes, the increase can in part be attributed to state regulators’ reclassification of “non-performing” any loan more than 90 days overdue. Eighty percent of the quarterly jump came from rural commercial banks.

Following a weaker economic outlook for the second half of 2018, policymakers in Beijing have begun to ease their strict stance on reining in elevated debt. Tariff threats and fears of a slowdown mean banks are now being encouraged to lend more, particularly for the purposes of infrastructure, small business and agriculture.