The ongoing property crisis in China is starting to impact the banking sector, leading to a rise in non-performing loans among major lenders.
Non-Performing Loans Surge
China’s big four banks, including Industrial and Commercial Bank of China, Bank of China, China Construction Bank, and Agricultural Bank of China, witnessed a significant increase in non-performing loans in 2023. These loans jumped by 10.4% from 1.117 trillion Chinese yuan in 2022 to 1.23 trillion yuan.
Impact on Bank Margins
While these banks remained profitable in the previous year, their margins are under pressure due to the repercussions of the real-estate debt crisis in China.
Government Intervention
Despite the challenges, Beijing is urging banks to provide more financing to property developers listed on a “white list” of companies. This move aims to stabilize the real-estate sector amid ongoing challenges.
Evergrande and Real-Estate Crisis
The real-estate sector in China has been facing difficulties since the latter half of 2021, particularly with the liquidity issues at Evergrande, once a major player in the market. Evergrande’s situation led to its liquidation, triggering concerns about similar challenges faced by other developers and potential spillover effects on the broader economy.
Resilience of Chinese Lenders
Despite the rise in bad loans, Chinese lenders have expressed confidence in their ability to navigate through the crisis. They believe they have sufficient buffers in place to manage lending risks associated with property developers.
The situation underscores the interconnectedness of China’s property market with its banking sector and the challenges posed by the ongoing real-estate crisis.
