Chinese banks' bad loans rocket to eight year high

Fuels fears of excessive and massive debt.

The China Banking Regulatory Commission said the record was set in Q3 when outstanding bad bank loans rose by US$3.96 billion to US$92.4 billion in September. That was the largest quarterly rise in bad loans since Q4 2005.

The system-wide NPL ratio rose only slightly to 0.97% from 0.96% from the end of June despite swift overall loan growth in Q3.

Analysts said the official NPL ratio understates the true extent of bad loans on Chinese banks' balance sheets. Independent estimates for end-June 2013 range from 1% to 5%. Analysts expect bad loans to rise further as growth slows and some loans extending back to 2008 turn sour.