Non-performing loans [NPL] of commercial banks in China dropped by 62.98 billion yuan to 497.33 billion yuan ($72.85 billion) in 2009, the China Banking Regulatory Commission [CBRC] said in a statement on Friday.
NPLs — which aside from the fiscal cost can effectively reduce bank capital and make them technically insolvent — represented 1.58 percent of the banks’ loan books, down 0.84 percentage points from the start of the year. CBRC said provision cover was 155.02%, up 38.57 percentage points.
Reuters: Ratings agency Fitch, affirming its “A+” long-term currency rating on China, said on Thursday that it was concerned about “an eventual deterioration in banks’ asset quality” after the surge in lending.
China undertook a massive loosening of credit last year as the government tried to free up more cash in an effort to beat the economic slowdown.
“In the agency’s view, falling non-performing loans do not indicate that banks’ asset quality is improving, as some new loans have been used to roll over delinquent obligations, and the predominance of bullet-oriented repayment structures means that any problems associated with recent lending are unlikely to be evident until the loans mature,” Fitch said.
Do you actually trust what the government of China is saying.