China warned to prepare for ‘big rise’ in bad loans as financial system braces against coronavirus, rising global tensions
- The China Banking and Insurance Regulatory Commission said this week Beijing’s efforts to avoid a broader financial crisis are facing fresh challenges
- China’s official statistics paint a picture of a sound financial system, but cracks are appearing in the banking system at a grass-roots level
China’s banking regulator has asked the country’s lenders to make preparations for a “big rise” in non-performing loans as part of Beijing’s efforts to brace its financial system for shocks from the coronavirus at home and a hostile environment abroad.
Runs on China’s small banks have become more frequent amid the current turmoil, while the loan repayment capabilities of Chinese companies and households have been undermined by the impact of the coronavirus.
Beijing has made efforts to avoid a broader financial crisis, but it is now facing fresh challenges, the China Banking and Insurance Regulatory Commission said this week.
China has to “prevent the cold ash of shadow banking from burning again”, while avoiding “a resurgence of chaos in real estate financing”, said a statement summarising a working conference held by China’s banking regulator this week.
Chinese banks could run into difficulty because of their operations, but it’s quite normal and won’t endanger the overall system
It has to also “make full preparations to counter changes in the external environment over the long run”, the statement added.