Wednesday, October 25, 2006

Chinese commercial banks suffer less bad loans

Non-performing loan ratio for major Chinese commercial banks dropped to 7.6 percent, down 1.3 percentage points over the beginning of the year.

Statistics with China Banking Regulatory Commission show that bad loans in the state commercial banks declined by 16.4 billion yuan to 1.1 trillion yuan by the end of September. The bad loan ratio reached 9.3 percent, down 1.2 percentage points over the beginning of the year.

Twelve joint-stock commercial banks reported bad loans of 116.8 billion yuan, a decline of 30.5 billion yuan over the beginning of the year. The bad loan ratio for them dropped 1.3 percentage points to 2.9 percent in the period.

Liu Mingkang, director of the commission, urged commercial banks to strengthen their efforts in reducing non-performing loans.

In the first nine months, Chinese financial institutions reported 724 lawbreaking cases, 190 fewer over the previous year.

Financial institutions in the banking sector should pay more attention to such cases, improve corporate governance and set up long-term mechanism of preventing risks, said Liu.

China is to fully open its financial sector by the end of this year according to its commitment to the World Trade Organization.

With the full entry of foreign banks, the outer environment of Chinese commercial banks would change greatly. They could only survive the market by enhancing income from businesses other than interest rate and improving capability of better performance and service to customers, said Liu.

Liu continued to say that commercial banks should try to change credit and loan structure, effectively control over-fast growth of mid and long-term loans, and develop credit services driving consumption.

China's economy has been in the risk of overheating. The government has taken a series of measures to cap its overheating investment and encourage consumption.