PBoC Spins China’s Bad-Loan Data
from Geo-Graphics

PBoC Spins China’s Bad-Loan Data

In a recent speech at Bloomberg’s headquarters in New York, People’s Bank of China Deputy Governor Yi Gang reassured his audience on the level of non-performing loans (NPLs) in the Chinese banking sector.  It had, he said, “pretty much stabilized after a long time of climbing.  That’s a good development in the financial market.”

Yi was referring to NPLs as a share of total loans, which, as shown in the figure above, have stabilized over the past year.  But this is misleading.  NPLs have actually continued to grow—by RMB 238 billion ($35 billion) in 2016, reaching a total of RMB 1.5 trillion ($220 billion).  The reason the NPL ratio has stabilized is that Chinese banks have extended more loans, boosting the denominator—not because they have reduced their exposure to bad loans.

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China

PBOC (People's Bank of China)

Banking

Monetary Policy

In short, Yi is spinning.  China’s bad-debt problem remains serious.

More on:

China

PBOC (People's Bank of China)

Banking

Monetary Policy