Bad loans by Chinese banks may rise this year because of the government's efforts to eliminate excess capacity in some industries but the risk is controllable, Yan Qingmin, the vice-chairman of the China Banking Regulatory Commission, said yesterday at the Boao forum. Yan said the current provision policy of Chinese banks would help manage rising risks from bad loans. "The non-performing loan ratio of Chinese banks will likely be maintained at about 1 per cent at the end of this year," he said. The NPL ratio in the banking sector stood at 0.98 per cent last year. The outstanding bad loans amounted to more than 700 billion yuan (HK$878 billion) at the end of 2013, and the banks had made provisions to handle 1.6 trillion yuan, Yan said. This should be good enough for banks to manage the rise in loans that went bad, he said. Yan added that the banking regulator would continue supportive measures on loans to small businesses. Some Chinese banks had hesitated in lending to small and micro-sized businesses owing to concerns over credit quality in a slowing economy. With tax incentives and fiscal policies launched last year, Yan said banks' loans to small enterprises increased by 19 per cent to 17 trillion yuan last year, while the NPL ratio for that kind of loan fell 0.23 percentage point to 2.02 per cent. Zhu Hongren, chief engineer of the Ministry of Industry and Information Technology, said some supportive measures were not yet in place, while others were little known because of a lack of promotion to enterprises that could use them. The ministry would step up efforts this year to ensure those fiscal and tax measures were in place, Zhu said. It might draft new measures that targeted micro-sized businesses, Zhu said. Yan said the banking regulator would also encourage micro and small enterprises to expand their funding channels to equity financing, instead of relying on debt financing. Regarding recent concerns over internet finance, Yan said that joint efforts would be needed given the different businesses in the sector. Supervision should fit the different business categories, he said.