Quoting the state-owned asset management company (AMC) that absorbs toxic assets from banks, China's financial magazine Caixin reported on July 20, 2017, that more businesses in China may be unable to repay their bank loans in coming years as the economy slows while the government steps up its deleveraging campaign. According to an estimate by China Orient Asset Management, one of the country’ four national state-owned AMCs, nonperforming loans (NPLs) in China’s banking system could reach 1.7 trillion yuan ($252 billion) by the end of this year, up from 1.51 trillion yuan as of the end of 2016. NPLs are expected to climb until 2019 at the earliest, China Orient said. It added that in the coming year, they will be concentrated in manufacturing, wholesale and retail, real estate, mining and construction sectors, as the government continues to undo the easy credit that has fueled these sectors in recent years. China Orient predicted also that as new loans continued growing, however, NPLs as a ratio to the banking system’s entire loan book is set to fall slightly to 1.7% by the end of 2017, from 1.74% a year earlier. The central bank said in a report last year that some lenders might have understated the amount of NPLs by at least 50%. It suggests that distressed assets at these commercial banks could be as much as 4 trillion yuan.
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