China’s banking sector to see stable growth

China’s banking sector is expected to grow steadily during the 2017-2018 period with a lower non-performing asset ratio.

The commercial banks’ assets are likely to grow by 10 percent a year, China Banking Association (CBA) said in its annual report.

The money supply will gradually expand, but problems including weak growth of interest rate differentials and rising credit costs might threaten net profits.

Commercial banks lent more money to small and micro businesses and in individual housing loans in 2016, and much less to industries suffering from overcapacity, according to Pan Guangwei, executive vice head of the CBA.

In 2017, commercial banks are expected to make adjustments to better serve the Belt and Road Initiative, Beijing-Tianjin-Hebei coordinated development and Yangtze River Economic Belt plans.

“The growth of outstanding non-performing loans (NPLs) of the listed banks and their NPL ratio has eased in 2016. Some of them even witnessed drops in the NPL ratio,” said Lian Ping, chief economist of the Bank of Communications, one of the authors of the report.

Given that the NPL burden has been relieved and experience gained in dealing with NPLs, such as debt-to-equity swaps, Lian expects the NPL ratio to be stable during 2017-2018 period.

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