Bad debts fall in high-growth regions

Banks’ bad debts ratio declined in the economically affluent regions that witnessed rapid growth in the past few years, while debt problems swelled in northeastern rust belt regions, according to statistics.

In the January-June period, bad loans over gross credit in Zhejiang province, which is regarded as the eastern business zone, dropped to 1.98 percent, down by 0.48 percent year-on-year, according to the latest data from the provincial banking regulatory bureau.

The ratio started to decline in 2016 from the high level of 2012.

In 2012, bankruptcies of a large number of small and medium-sized enterprises in Wenzhou, one of China’s richest economic hubs, led to billions of yuan in bad debts for banks.

Starting from 2016, the China Banking Regulatory Commission rolled out measures to improve credit management and regulate enterprises’ errant financial behavior.

The province’s total amount of outstanding debts might continue to rise given SMEs’ strong appetite for financing. But Zhejiang is on track to see a further decline in its bad debts ratio, according to a report by China Orient Asset Management in July.

Meanwhile, bad debt risks continue to increase in northeastern provinces, with many debt-laden traditional manufacturing enterprises grappling with restructuring.

By the end of June, the bad debt ratio in Heilongjiang province was 3.38 percent, and that of Liaoning province stood at 2.96 percent by the end of first quarter, latest data showed.

Data from China’s 10 listed banks showed that by the end of 2016, outstanding non-performing loans of the manufacturing sector reached 300 billion yuan ($44.6 billion), topping the sectoral list that included retail.

Banks have to improve efficiency through measures such as credit rollovers in less developed regions, at a time when firms remain under intense credit pressure, said Jiang Yueming, a manager with China Orient Asset Management.