China to better tackle NPLs

Wary that spike could threaten structural reforms.

China Banking Regulatory Commission chief Shang Fulin promised to work harder to stem the risks of a possible rise in non-performing loans, especially from industries hammered by overcapacity. China's NPL ratio for commercial banks stood at 0.96% in June, unchanged from March. Shang said banks must seek various channels to safely dispose of bad loans in industries facing acute overcapacity problems.

He added that banks must also seek various channels to clean up bad loans by industries with overcapacity to prevent new risks from brewing. The China Banking Association said bad loans at Chinese banks could rise by between US$11.5 billion and US$16.4 billion partly due to delinquency risks from industries plagued by overcapacity. It mentioned the steel, photovoltaic and shipping sectors as being at greatest risk from bad loans.