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Current Situation and Changing Trends of Credit Risks for China's Banking Sector (No 114, 2015)


——Based on Analysis of 21 Listed Banks

By Zhu Hongming & Lei Wei, Research Team on "Analysis of Listed Banks", Research Institute of Finance of DRC

Research Report No 114, 2015 (Total 4799)


Due to the impact of an earlier high-speed credit expansion and an economic cycle characterized simultaneously by a slowdown in economic growth, difficult structural adjustments and effects of previous economic stimulus policies, the balance and ratio of non-performing assets (NPA) of China's commercial banks tend to rebound with a constantly increasing speed. Taking the performance of China's 21 listed banks as an example, this paper analyzes the operation and changing trends of the credit risks for China's listed banks in 2014. It is shown that there is an accelerated rebound in the balance and ratio of NPA of China’s listed banks in 2014 and a marked fall in provision coverage. In terms of future trends, NPA will continue its tendency for a further rebound, with an extent likely to be no lower than one in 2014. Provision coverage is also likely to slip to about the regulatory minimum. To avoid the big impact brought about by the outburst of credit risks on the financial system and socio-economic stability, it is suggested that efforts should be made to further improve the financial eco-environment to avert disorderly expansion of credit risks; to speed up the handling of NPA; and to withdraw as much provision for the impairment of assets as possible in accord with the principle of acting cautiously so as to get better prepared for addressing credit risks.