Home > Uncategorized > China’s ‘Non-Performing Loan’ Nightmare | ZeroHedge

China’s ‘Non-Performing Loan’ Nightmare | ZeroHedge

China’s credit risk is rising, probably much more rapidly than the official non-performing loan (NPL) statistics indicate. SocGen is concerned as they think we are only seeing the beginning of the end of this NPL cycle. While they do not anticipate an outright banking crisis, as the government will certainly keep intervening at each turn on the way to avoid such an outcome, this is no reason to feel relieved. The reason being a major structural element in China’s NPL cycle as many industries have massive excess capacity – after years of aggressive expansion that ran way ahead of demand growth – which eventually has to be eliminated. This process will take some time, during which faster depreciation in the form of deleveraging and consolidation will be unavoidable; and while expectations of an imminent hard landing may be overdone, the landing will nevertheless be multi-year and bumpy in their view.

Societe Generale: The NPL issue is rearing its ugly head

According to the China Banking Regulatory Commission (CBRC), total NPLs at China’s commercial banks reached CNY 456.4bn at end-Q2, 4.2% qoq and up 11.9% (or CNY 48.6bn) from the trough in Q3 11. The NPL ratio was unchanged at 0.9%, due to a similar pace of loan growth. However, special-mention loans that are doubtful but still performing increased to CNY 1.5tn, while the total loan loss reserves set aside were CNY 1.3tn.

via China’s ‘Non-Performing Loan’ Nightmare | ZeroHedge.

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