China's banking sector expected to dispose $490 billion of bad loans in 2020

Thursday, 13 August 2020

China’s banking industry is expected to dispose 3.4 trillion yuan ($489.91 billion) of bad loans in 2020 to contain financial risks in an economy weakened by Covid-19, according to a Xinhua report run by the Reuters news agency.

“The sector will further step up bad loan disposals in 2021, as some of the problems will be exposed next year due to delayed loan payments,” Xinhua quoted Guo Shuqing, chairman of the China Banking and Insurance Regulatory Commission (CBIRC), as saying in and interview released on Thursday.

Chinese lenders disposed 2.3 trillion yuan of bad loans in 2019, according to Guo.

Guo, also the Communist Party chief of China’s central bank, warned that financial risks are prone to occur under current circumstances, and that the upward pressure on bad loans is “relatively big”.

He urged banks to boost loan loss provisions and replenish their capital to strengthen their buffers against risks.