World Economy

China’s Bad Loans Rising

China’s Bad Loans RisingChina’s Bad Loans Rising

Chinese banks saw their bad loans rise in the first quarter due to the slowing down of the world’s second largest economy, but the risks were “under control”, the banking regulator said on Sunday.

Guo Ligen, vice chairman of China Banking Regulatory Commission told a financial forum that non-performing loans by banks have been rising as many sectors have felt the pains of the slowing economy, PTI reported.

The increase in bad loans came as China moved to reduce the capacity of oversupplied industries and close “zombie companies”. The measures are part of a wider push to restructure and upgrade a slowing economy.

By the end of Q1, outstanding loans to five severely oversupplied industries rose only 0.1% from the same period last year, Guo said without specifying the exact amount of the bad loans. He said the overall risk of the banking industry was “under control,” pledging that the CBRC will improve regulations in line with the new conditions in the macro-economy.

He reaffirmed that banks should boost lending to strategic and emerging industries, and should continue to support oversupplied industries to reduce production capacity.

By the end of Q1, China’s non-performing loan ratio to total loans stood at 1.75%, lower than the international average level. The capital adequacy ratio of Chinese banks was 13.37%.

 Call for Foreign Investments

China will lift restrictions to investments by foreign firms in a range of service industry sectors, including e-commerce, logistics, accounting and auditing, Reuters quoted Gao as saying.

He further said that China would also promote the orderly opening of other service fields including finance, education, culture and health care, the report published on Saturday said without elaborating or giving a time-frame. China’s trade in services would exceed $1 trillion by 2020, the minister predicted.

The ministry of commerce has previously said the value of China’s services trade was expected to exceed $750 billion this year.

The Chinese government has been attempting to guide the economy away from a reliance on investment and exports to one largely orientated towards services and underpinned by domestic demand.

Gao’s comments come on the eve of bilateral meetings in early June between China and the United States in which US officials are poised to press their Chinese counterparts to take steps to improve the business and investment climate and open Chinese growth sectors to US investment.

US President Barack Obama administration is negotiating a bilateral investment treaty with China, and US negotiators have said they are still awaiting a new “negative list” of sectors that Beijing wants to keep off limits.