BEIJING, July 25 Banks' non-performing loan
ratio in the eastern Chinese city of Wenzhou surged to 2.69
percent at end-June, the highest in a decade, as firms struggle
to cope with a lingering credit crunch, local media reported on
NPLs of banks operating in Wenzhou, an entrepreneurial hub
in coastal Zhejiang province, almost doubled in the first half
of 2012 to 18.14 billion yuan ($2.84 billion), financial
magazine Caixin reported on its website, citing official data.
The NPL ratio climbed from 1.33 percent at the start of 2012
and 0.37 percent in June 2011, the report said, without
identifying any of the banks.
"The non-performing loan ratio of banks in Wenzhou is
approaching a peak," Caixin quoted Zhang Zhenyu, head of the
municipal government's finance office, as saying.
"The government will lower the NPL ratio by stepping up
asset disposals and increasing cash flows," Zhang said, without
Zhang attributed soaring bad loans to a credit crunch that
rocked the free wheeling city, famous for thriving private
entrepreneurs and grey-market lending networks to finance them.
A string of high-profile bushiness failures prompted Premier
Wen Jiabao to visit Wenzhou last October, telling banks to lend
more to cash-stricken small firms and tolerate high levels of
bad loans from them while demanding a crackdown on the
high-interest underground lending market.
Bank's real bad loans, or those cannot be recovered, could
be between 900 million yuan and 1 billion yuan, or less than 0.5
percent of total loans that compared to their combined profits
of 19 billion yuan last year, Zhang said.
Commercial banks in Wenzhou are well positioned to absorb
NPL ratios as high as 4-5 percent, Zhang said.
In March, China's cabinet gave the go-ahead for a pilot
financial reform project in Wenzhou, including goals of setting
up micro-finance companies as it tackles underground lending.
Rising bad loan costs among Chinese banks highlight growing
concern that banks are feeling the pinch after China's annual
economic growth slowed to a three-year low of 7.6 percent in the
second quarter, the sixth consecutive quarter of slower
The Financial News, which is run by the central bank, said
on Wednesday that a rise in bad loans should not be surprising
as China's once turbo-charged economy loses steam.
"A rebound in banks' non-conforming loans should be expected
as the economy enters a period of slower growth," the newspaper
quoted Liu Yuhui, an economist at the Chinese Academy of Social
Sciences, a top government think-tank, as saying.
The paper cited data from Zhejiang government as saying that
non-performing loans in the province, one of the richest in
China, climbed by 4.55 billion yuan in 2011 to 49.14 billion
yuan at the end of the year.
The NPL ratio for the entire banking industry stood at 0.9
percent at the end of March, down slightly from 1 percent at the
end of 2011, according to data released by the Chinese banking
However, many private analysts believe the real figures
could be much higher.
($1 = 6.3858 Chinese yuan)
(Reporting by Kevin Yao; Editing by Kim Coghill)