Non-performing loans from infrastructure construction may surge around 2012 after a lending binge that started in 2009 and continued into the first half of this year, reported Beijing-based International Finance News, citing a latest market survey and central bank statistics.
The survey on the non-performing loans (NPLs) market released by China Orient Asset Management Corp on July 9 said commercial banks will see their NPLs increase slightly this year, but China's rapid economic growth and moderately loose monetary policy will take some of the pressure off.
"Chinese commercial banks enjoy abundant profits and have high provision coverage, the profitability of enterprises continues to improve, and the current control measures on the real estate market can hardly pose a real risk to the banks," the Orient Asset report said. "Therefore, there won't be massive opportunities indicating a trend in the NPL market, but structural opportunities will continue to exist."
However, it warned that the lending spree since 2009 may result in a rebound of NPLs after two or three years and the risk from the financial platforms of local governments is especially high, the newspaper reported.
China launched a massive stimulus package to bolster the economy after the world financial crisis broke out in the second half of 2008. Last year, China's financial institutions lent a skyrocketing 9.6 trillion yuan ($1.4 trillion).
New lending continued to soar in the first half of 2010, as the central bank figures released Sunday showed that yuan-denominated loans extended by financial institutions increased by 4.63 trillion yuan from January to June.
