Ernst & Young has estimated the non-performing loans of Chinese banks at 34 per cent of their total lending, according to a report by the international financial services group. In July the People's Bank of China stated that the ratio at the big four banks was 25.37 per cent, representing a 2.26 per cent fall since the start of the year.
Ernst & Young said that its estimate was calculated by strict application of international accounting standards and by inclusion of the bad debts that had been transferred to asset management companies. The report added that the financial restructuring of indebted companies was being hampered by local opponents of reform who feared loss of control over state assets and job cuts.
The Industrial and Commercial Bank of China said that its non-performing loans had dropped by 2.28 percentage points at the end of June from a year earlier. Bank of China had reduced its non-performing loans to 20.25 per cent of total lending, according to Financial News. The bank said it had tightened risk management and established special offices to monitor risks at all levels, with the result that only 0.6 per cent of all loans granted since 2000 were non-performing.