Bad loans in China increased to 39% in 2014

Noam Stiekema

The bad loans in China increased to 39% in 2014 amid the economic slowdown. The asset quality continues to deteriorate, while the average number of overdue loans is constantly increasing, noting that there is increasing pressure overdue loans to be converted into the category of non-performing loans. Slowdown in the second largest economy in the […]

China bad loans

China bad loansThe bad loans in China increased to 39% in 2014 amid the economic slowdown. The asset quality continues to deteriorate, while the average number of overdue loans is constantly increasing, noting that there is increasing pressure overdue loans to be converted into the category of non-performing loans. Slowdown in the second largest economy in the world provoked the Chinese central bank to boost lending, despite clear signals that their quality deteriorates.

The Chinese economy expanded at the slowest pace in 24 years in 2014, being able to achieve growth envisaged by the authorities for the first time since 1998. The economy continued to lose momentum in the first quarter of this year, registering the weakest increase since six years. Chinese central bank has taken relief measures to prevent further delay economy. Earlier this week the regulator reduced the reserve requirement ratio for banks by 100 basis points – the second such move in the past three months. As the economy slows, the loans granted by the 12 largest lenders in the country grow, but their quality seems to be getting worse.

The combined balance of loans of banks increased by 11.49% yoy in 2014 to 52.31 billion CNY (8.44 billion USD) as assessed by PwC. However, bad loans in China increased by a much higher percentage of 38.23% to 641.5 billion CNY, the report said. Arrears even jumped by as much as 112.65% on an annual basis.

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