Bad loans reach $900b in China

Beijing, May 3 :

China’s banking debt problem is far higher than official estimates indicate with non-performing loans worth as much as 900 billion dollars, the Financial Times reported on Wednesday. Citing an Ernst and Young survey, the London-based newspaper said the NPLs for China’s big four banks alone were worth 358 billion dollars, more than double the government’s figure.

Ernst and Young’s latest numbers compare with its estimate in 2002 that NPLs then were worth $480 billion, with the problem worsening despite recent government reforms of the banking sector to try and fix the debt problem. China’s NPLs have expanded partly as a result of rapid loan growth that has accompanied the nation’s economic growth of around 10 per cent in recent years, the Financial Times said. But it cited the Ernst and Young survey as saying the higher numbers were also simply due to better access to information on China’s banking sector.

The worsening debt situation in China comes as foreign institutions continue to move into the sector and as the nation’s big banks seek a higher international profile. China Construction Bank listed on the Hong Kong stock exchange last year, while the Bank of China and the Industrial and Commercial Bank of China are looking to float this year.