Follow us on TWITTER: http://twitter.com/cnforbiddennews
Like us on FACEBOOK: http://www.facebook.com/chinaforbiddennews
Recently, a newly released report revealed that in last year,
"newly added bad loans" of China´s five state-owned banks,
reached 46.831 billion RMB (US$ 7.4 billion),
three times that of 2012.
The debt write-downs (reduction in book value of assets)
of five banks,
are up at 59 billion RMB, an increase of 120 percent
comparing it to2012.
This makes it the highest on record in the
So what´s the reason for soaring bad loans in China´s
bank industry? What does the situation indicate and mean?
In addition, will the slowing down of the Chinese economy
aggravate the bank industry with serious debts?
Let´s follow the experts´ analysis.
According to Tencent´s Financial website report on Apirl 2,
the annual report of 12 public listed banks in Mainland
China last year,
revealed debt write-downs of China´s largest
five state-owned banks,
had reached 59 billion RMB with an annual
increase rate of 120 percent.
This takes it to its highest levels in the last decade.
US-based Wall Street Journal reported on March 31,
China´s five largest state-owned banks are to strengthen
their efforts on offsetting bad loans.
It is estimated that the bad loans written down and moved
beyond the financial sheets,
had reached 63.92 billion RMB (US$10.5 billion),
as much as 2.5 times more than that of 2012.
Professor Frank Xie from the School of Business Administration,
University of South Carolina Aiken:
"The soaring write-downs and offsetting of more bad loans,
indicates Chinese state-owned banks,
are experiencing major issues within their operations."
These five state-owned banks include, Industrial and Commercial
Bank of China (ICBC),
China Construction Bank (CCB), Agricultural Bank of China (ABC),
Bank of China and Bank of Communications.
Prof Xie says, due to offering large-scale loans
from these state-owned banks,
huge amounts of money becomes bad loans and bad debts,
which then produces the "money famine" or liquidity crisis
occurring among state-owned banks in the last half of this year.
China´s state financial report from last year, shows that
five banks have a total "newly added bad loans"
of 46.831 billion RMB,
yet when compared to 2012, it was 10.952 billion RMB
Many investors think, considering the opaque management
of state-owned enterprises in China,
the bad loans of these banks, may well be much higher
than the official data given.
The CEO from the Bank of China Mr Chen Siqing expresses,
around 27 percent l of all local governmental financing
platform loans, will expire this year,
and loans for the industrial sector, will be in excess production
capacity of 188.5 billion RMB (US$ 30 billion).
Does his saying indicate that there will be more loans that
are going to be difficult to retrieve?
Chen Siqing says, in this year alone, the assets exist within
three loan categories,
including local governmental financing platform, industries with
excess capacity and property the development industry,
all of these sectors will be closely watched over in the
ensuing months ahead.
Prof Xie says, the revenue of banks come from the interest gaps
between deposits and loans.
Prof Xie: "But essentially, non-governmental loans
have not yet been developed into a vast quantity.
A considerable amount come from the loans of enterprises.
However, along with the stagnant status of China´s economy
or excess capacity of some industries, many enterprises go bust.
In addition to the broken bubbles of the property industry,
all of these loans will become dead accounts, which is the
main reason for the increase in bad debts."
According to media reports, the increase rate of China´s GDP
(gross domestic product),
has slowed down from 13 percent in 2007 to 7.7 percent in 2013.
In the first quarter of 2014, the GDP increase rate might well
be further reduced to around 7.3 percent.
Wall Street Journal reported, the slowing down of the economy,
will impact upon the capability of repaying debts of many companies.
The first contract-breaking case, happened in China´s company
bond market in March.
Shanghai Chaori Solar Energy Science & Technology
was unable to repay the interest of its bond,
with an amount owing of 89.8 million RMB.
In addition, Zhejiang Xingrun Real Estate Company,
as a real estate developer,
says their company cannot repay the bank loan
of 600 million US dollars.
Mainland financial analyst Mr Ren Zhongdao:
Tencent Finance points out, slowing down the economy, largely
produces the rising of write-downs of bad debts,