China’s sluggish economic growth will worsen banks’ non-performing loans.
International accounting firm Ernst & Young (Ernst & Young) recently said in a report that mainland banks have pressure to grow non-performing loan balances in the second half of the year. Experts believe that there is uncertainty about the mainland’s economic recovery.
According to Hong Kong’s Hong Kong Economic Journal on May 21, Ernst & Young’s “Overview of the First Quarter 2021 Results of China’s 38 A-share Listed Banks” showed that the average non-performing loan ratio of mainland banks was 1.43% as of the end of March, down from the end of last year, but non-performing loan balances still saw an increase.
In this regard, Ernst & Young South China Financial Services Managing Partner Zhang Bingxian said that there is uncertainty in the recovery of the mainland economy, if the regional banking business is more concentrated in individual regions, and the region’s economic recovery is slower, the pressure on the quality of assets turned worse. In addition, the U.S. and China political tug-of-war also makes the mainland business operations continue to face challenges.
In April this year, the mainland economic data already showed that the mainland economic growth rate declined, and the recovery showed weakness. The National Bureau of Statistics of the Communist Party of China released economic data for April on May 17, showing that consumption, industry and investment all slowed down, with consumption and industrial output both worse than expected.
The data showed that total retail sales of consumer goods, industrial value added above the scale and fixed asset investment figures in April increased by 17.7%, 9.8% and 19% year-on-year, respectively. Previous market expectations were for a year-on-year increase of 25%, 10% and 19%, respectively.
Consumption and industry were both lower than expected, also well below the 34.2% and 14.1% in March. Fixed asset investment, although higher than expected, was lower than the 25.6% in the previous three months and still dominated by real estate investment, with manufacturing investment performing generally.
According to Wang Jun, chief economist of Centaline Bank, the growth rates of industry, consumption and investment all dropped significantly in April, showing that both the supply and demand sides are growing weakly and the economic recovery momentum is weakening.
Reuters quoted Zhonghai Shengrong chief economist Zhang Yi’s analysis, said, considering the continued recurrence of the plague led to some consumption scenarios restricted, and superimposed on the impact of residents’ precautionary savings, still maintain a cautious attitude towards retail sales of consumer goods, is expected to continue to be lower than market expectations is the probable event.
With the current international environment besieging the Chinese Communist Party, the Beijing authorities’ wish to rely on consumption to drive economic growth may be defeated.
Commentator Wen Xiaogang said, at present, the U.S. still maintains the tariff penalties on Chinese goods in the trade war, and the EU has frozen the EU-China agreement, which has dashed the CCP’s wish to rely on exports to tap economic growth momentum, while mainland consumption remains sluggish. As of now, the Chinese Communist Party still cannot find a growth point for the economy. In addition, the mainland raw materials soaring, production costs have increased greatly, enterprises are suffering, many small and medium-sized micro enterprises in the cracks struggling, if raw material prices continue to remain high, these enterprises will face the dilemma of closing down. Once enterprises close down on a large scale, bank loans will fizzle out, bad debts will increase and non-performing loans will rise.
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