China's banking sector has made progress in improving risk management and structural adjustment, the industry regulator said yesterday.

 

The China Banking Regulatory Commission (CBRC) revealed that non-performing loans (NPL) stood at 1.28 trillion yuan (US$160 billion) by the end of June, 43.5 billion yuan (US$5.44 billion) lower than at the end of 2005.

 

The NPL ratio for all banks fell to 7.5 percent at the end of June, compared with the 8.6 percent at the end of 2005.

 

State-owned banks' NPL ratio was 9.5 percent by the end of June, a fall of 1 percentage point since the end of 2005, while that of joint stock banks fell 1.1 percentage point since the end of 2005 to 3.1 percent by the end of June.

 

State-owned lenders' outstanding NPLs were 1.056 trillion yuan (US$132 billion) by the end of June, 16.58 billion yuan (US$2.07 billion) lower than at the end of last year.

 

Joint stock banks have total outstanding NPLs of 122.12 billion yuan (US$15.3 billion), down from 25.17 billion yuan (US$3.15 billion) at the end of last year.

 

In recent months, the commission has repeatedly urged domestic banks to be cautious about lending to sectors that face overcapacity.

 

Meanwhile, the CBRC's detection of irregularities and illegal activities also prevented a total loss of 520 million yuan (US$65 million) from the banking sector in the first half of the year.

 

In order to improve their ability to fend off risks, the CBRC urged banks to raise their capital-adequacy ratios.

 

By the end of June, 55 banks had capital adequacy ratios of above 8 percent, two more than at the end of 2005.

 

While improving risk-management abilities, the banking sector has also adjusted its loan structure, in line with the central government's macroeconomic policies, the CBRC said.

 

By the end of June, the percentage of short-term loans rose to more than half of the total, with these being 1.13 trillion yuan (US$141 billion) higher than at the end of 2005. Medium- and long-term loans increased by 1.048 trillion yuan (US$131 billion) during the period.

 

The industry also diversified its business structure by offering more credit to the agricultural sector, individuals and small enterprises.

 

By the end of June, outstanding individual consumer loans were 2.34 trillion yuan (US$292.5 billion), an increase of 10.9 percent over a year ago.

 

Outstanding loans to small enterprises totalled 3.25 trillion yuan (US$406 billion) by the end of June, accounting for 14.7 percent of total loans.

 

Rural financial institutions' outstanding loans rose 20.6 percent year-on-year to 1.3 trillion yuan (US$162 billion).

 

(China Daily August 22, 2006)