Non-performing loans up 28% in first half as China economy struggles

PARIS – Credit insurer Coface says non-performing loans (NPLs) in China have been rising, with the absolute amount of NPLs increasing by 28.7% on-year in the first half of 2014. “On the one hand, we see growth stabilising, on the other we see industry participants – particularly smaller companies - facing mounting pressure, from the cost of financing to the slowdown in demand growth.”

“The growing level of NPLs is leading to concerns over lending qualities, while the cost of financing remains a concern to various sectors and smaller companies that lack access to credit facilities,” said Rocky Tung, Coface Economist for the Asia-Pacific Region. “Hence, with inflation under control, a broad-based interest rate cut could help ease financing pressure on companies and bring growth closer to the government’s 7.5% target.”

With domestic demand remaining subdued, the property market sluggish and over-capacity in some sectors, Coface believes it is unlikely that China will achieve its 7.5% growth target this year. Coface expects GDP growth in China to reach 7.4% in 2014, given that more policy support is in sight. www.coface.com (ATI).