Chinese bonds are increasingly seen as a safe haven as US national debt level spikes over $30 trillion. Photo: iStock

Chinese authorities are to speed up the settlement of non-performing loans (NPLs) in the second half of this year, while analysts are calling for attention to small and medium-sized housing companies and companies dependent on foreign demand.

The China Banking and Insurance Regulatory Commission (CBIRC) said it would urge banks to make a bona fide classification of their assets, truthfully exposing their NPLs. Glossing over bad loans and manipulating balance sheets will be resolutely dealt with, it added.

The CBIRC said it would guide banks to step up the settlement of NPLs and ask them to set aside sufficient provisions.

Shen Juan, an analyst with Huatai Securities, attributed the quickened pace of bad loans settlement in the second half of the year to factors that include an expected increase of bad loans due to the delayed impact of the Covid-19 epidemic and banks’ high provision coverage ratio (PCR) which affords them enough ammunition to settle bad loans.

Chinese commercial banks’ PCR, the ratio of provisioning to gross non-performing assets which indicates the funds a bank has kept aside to cover loan losses, stood at a high of 183% by the end of the first quarter, Shen said.

She called for attention to risks in the retail sector, especially in the second and third quarters, as well as risks in companies that rely on foreign demand such as those related to ports, computers and automobiles.

Zhao Yarui, a researcher with the financial research center of the Bank of Communications, highlighted risks in small and medium-sized housing companies due to their high level of leverage, slowing sales, relatively weak management, crunches in financing and operating cash flow.

The NPL ratio of China’s banking industry came in at 2.04% at the end of the first quarter, up 0.06 percentage points compared with the beginning of the year, CBIRC data showed.

Power generation

China’s electricity generation is rising at a faster pace after a significant increase in May, buoyed by growing demand, said the State Grid Corporation of China (SGCC).

“As a bellwether of China’s economy, a hike in power generation shows the country’s economic and social activities are returning to normal at an accelerated pace,” said Shan Baoguo, deputy chief economist with the State Grid Energy Research Institute.

Most parts of China have seen higher temperatures since June, which also contributed to the increase, Shan added.

In east China’s Jiangsu Province, electricity consumed by the information technology and software industries continued to grow rapidly, while the mining, food processing and equipment manufacturing sectors also reported rapid increases in power consumption.

The gradual industrial recovery and the summer harvest explained part of the recent increases, said Wang Yiqing with the Xuzhou branch of SGCC.

Electricity consumption in the city of Xuzhou in Jiangsu Province jumped by 15.4% year on year in early June. Xuzhou Construction Machinery Group, a leading engineering machinery manufacturer, saw its power consumption up by almost 30% during the period, according to Wang.

China Merchants Land

China Merchants Land, a Hong Kong-listed company, said its indirect non-wholly owned subsidiary, China Merchants Nanjing, had entered into a cooperation agreement with Nanjing Huade to develop a Qinhuai plot through its project company named Nanjing Huayao Real Estate.

According to the cooperation agreement, China Merchants Nanjing and Nanjing Huade will bear a land price of 6.91 billion yuan (US$973 million) according to their respective 45% and 55% shareholding in the project company.

Upon completion of the cooperation agreement, the registered capital of Nanjing Huayao Real Estate will be increased to 4 billion yuan from the current 20 million yuan.

The story was written by Huang Wanyi and Liu Licong and first published at It was translated by Nadeem Xu.

Xu Yuenai

Xu Yuenai is a Beijing-based columnist specializing in international relations.