China says bad loans may rebound in 2014 but still under control
April 08 2014
BOAO, China - China's banks may see their bad loans rebounding this year due to government efforts to reduce overcapacity in some industries, Yan Qingmin, a vice chairman of the China Banking Regulatory Commission (CBRC) said on Tuesday.
Yan told reporters at the Boao forum in the tropical island of Hainan that the average non-performing loan (NPL) ratio of Chinese banks could still be kept around 1 per cent at the end of 2014, as they had set aside enough provisions.
The Shanghai Securities News reported last week that the CBRC would conduct regional and national stress tests after banks saw a spike in bad loans last year, reflecting growing concerns over credit risk.
Chinese banks' NPL ratio rose to 1.0 per cent at the end of December, its highest level in two years, the CBRC reported in February.
Bankers and analysts expect bad loans to rise further this year as economic growth slows and banks deal with the aftermath of a huge lending binge that policymakers unleashed to soften the impact of the global financial crisis in 2008.
The clash between entrenched interests in China's traditional finance sector and its internet companies has escalated in recent weeks, with banks imposing limits on how much their customers can transfer to online finance services and the authorities looking into potentially heavy regulation. "We must appropriately regulate internet finance industry and in the future we will set a basic or minimum threshold for the market access. Otherwise, we will see unfair competitions in the sector," Yan said.
Though small, online and mobile payment transactions in China have been growing rapidly. The online payment market last year grew 47 per cent to 5.37 trillion yuan (S$1.089 trillion) in transactions, according to Beijing-based consultancy iResearch.
Internet companies have also rolled out higher yielding wealth management products to compete with banks, contributing to interest rate liberalisation in China.