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China Exclusive: Bad loan risk looms over banking sector

(Xinhua)

08:41, September 03, 2012

SHANGHAI, Sept. 1 (Xinhua) -- China's commercial banks are facing a high risk of increased bad loans, partly due to a lending spree to support massive economic stimulus three years ago.

That risk might worsen as local governments have attempted to unleash a new round of stimulus packages amid the current economic downturn, market analysts have warned.

Seven out of the 16 Chinese listed banks reported a rise in their Non-Performing Loan (NPL) ratios in the first half of 2012, according to their interim reports.

Though many managed to keep the ratio below 1 percent, bad loans in some particular sectors and regions were more significant.

China Everbright Bank, for example, said the NPL ratio for its loans extended to small and medium-sized businesses reached 1.63 percent.

Loans extended to businesses in Wenzhou, a city in east China known for its entrepreneurship, went bad most notably for Ping An Bank and Bank of Communications. About 27.6 percent of Ping An's outstanding bad loans originated from Wenzhou, according to the bank's interim report.


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