The Chinese banking sector's asset quality is unlikely to worsen in 2019 thanks to more accommodative government policies, even though the sector's nonperforming loan ratio has risen for the past several quarters.
In the three months ended Sept. 30, the sector's NPL ratio was 1.87%, up from 1.86% in the second quarter and 1.74% a year earlier, according to data from the China Banking and Insurance Regulatory Commission.
Asset quality remained weakest at rural commercial banks, which reported an aggregate NPL ratio of 4.23%. Privately owned banks continued to outshine other bank types in this area, with an aggregate NPL ratio of 0.48%.
The rise in NPL ratios comes following the Chinese government's call for lenders to classify all loans overdue for more than 90 days as nonperforming. More Chinese corporates have also failed to repay loans as economic growth slows, trade frictions remain heightened and an ongoing government clampdown on shadow banking funding channels.
While asset quality will remain a concern, Beijing has rolled out policies to increase access to funding for small and struggling borrowers and urged lenders to heed that call. The capacity of borrowers to repay debt is likely to improve, which will help stabilize asset quality, unless China's economic growth slows more sharply, Moody's said Dec. 4.
As of Dec. 28, US$1 was equivalent to 6.88 Chinese yuan.
To see aggregate banking statistics for a specific country, go to the country's profile on the website by using the search function at the top of the site. From the left sidebar, click on "Aggregate Financial Highlights" under the "Banking Industry" section. Here is an example for China.