No end in sight for bad-debt malaise at mainland Chinese banks
Economic slowdown will continue to mount pressure on the asset quality in the sector
Joey Li, the owner of a micro-credit company in Jiangsu province, says he spent most of his time this month trying to collect debts.
But many of the cable manufacturers, metal producers, textile plants and small hotels he has lent money to over the past two years were closed and deserted, with overdue loans soaring to 140 million yuan (HK$177 million).
When Li began lending money three years ago, he started off with 200 million yuan.
"Among the overdue loans, it is possible to recover only 20 million to 30 million yuan," the 38-year-old said. "In addition to filing lawsuits against the borrowers, what I can do now is to pray for the economy to improve next year."
Economists expect the non-performing loans of mainland banks to continue to grow next year, with economic growth likely to further decelerate amid a slight tightening of monetary policy to contain financial risks.
The lending binge after the 2008 global financial crisis increased leverage in the economy, sent bad loans soaring and added to overcapacity in the steel and cement industries.