China’s top banking regulator warns of bad loans, “serious” local real estate bubbles

Photographer: SeongJoon Cho /Bloomberg

China’s top banking and insurance regulator said banks should guard against a rise in non-performing assets, as the country rolls back some of the relief measures implemented during the pandemic to help firms withstand the fallout.

In 2020, the central bank encouraged financial institutions to lower rates for virus-stricken firms and extend payment deadlines, among other measures, to give borrowers some breathing space during the coronavirus crisis.

“The default rate for some large and medium-sized enterprises has risen, and the credit risks at banking institutions has intensified,” Guo Shuqing told a financial forum in Shanghai via a video message.

He said a growing trend of local real estate bubbles remained “serious”.

Corporate bond defaults have risen sharply in China in recent years, reaching $14 billion in 2020, according to the Institute of International Finance. Chinese banks extended a record $3 trillion in new loans in 2020, according to data from the People’s Bank of China.

Investors should also be aware of potential investment losses on financial derivative products, commodity-linked futures, and rising Ponzi schemes, Guo said.

The regulator will also resolutely clean up illegal security issuance activities and fend off the pick-up in shadow banking activities, Guo added.

Commenting on global markets, Guo, who also serves as the Communist Party chief at the central bank, said that monetary policies in some developed countries are “unprecedentedly loose.”

“These measures have stabilised the market in (the) short-term but require all countries in the world to share responsibility for the negative effects,” he said.

A rise in global inflation has arrived and may last longer than some of the U.S. and European experts have expected, Guo added.

Reuters

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.