China's top banking regulator warns of a rise in non-performing assets

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China's top banking regulator warns of a rise in non-performing assets

SHANGHAI - China's top banking and insurance regulator said banks should be concerned about 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 launch lower rates for virus-stricken firms and extend the payment deadlines, among other measures, to give borrowers some breathing space during the coronavirus crisis.

The default rate for some banks has increased, and the credit risk at financial institutions is greater, Guo Shuqing told a financial forum in Shanghai via video message.

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

In China, Corporate Bond defaults have risen sharply in the last few years, reaching $14 billion in 2020 according to the Institute of International Finance. According to data from the People's Bank of China, Chinese banks extended a record 3 trillion dollars in new loans in 2020.

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

The regulator will also resolutely clean up shadow enforcement activities and battle in illegal banking activities, Guo added.

Commenting on the international markets, Guo, who also serves as the Chief Deputy of the Central Bank at the Communist Party, said that monetary policies in some developed countries are unprecedentedly loose.

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

A major rise in global inflation has arrived and could last longer than some US and Europe experts predicted, Guo added.

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