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China Banks' Bad Loans Jump By Most In 8 Years

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Bad loans held by Chinese banks rose by the largest amount in eight years in the third quarter, adding to concerns about excessive debt as the world's second largest economy slows.

Bad bank loans outstanding rose by 24.1 billion yuan ($3.96 billion) to 563 billion yuan at the end of September, according to the China Banking Regulatory Commission. That marked the largest quarterly rise in the volume of bad loans since the fourth quarter of 2005.

Due to swift overall loan growth in the third quarter, however, Chinese banks' non-performing loan ratio ticked up only slightly. The system-wide NPL ratio reached 0.97 percent from 0.96 percent from the end of June, the commission said.

You do wonder what the real figure is, if this is the figure the Chinese communists are willing to admit too is the real figure likely to be far worse?

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I have thought for a few months that maybe a BIG China banking crisis will finally put the UK over the edge. There wont be many China Mugs buying in London then.

Reuters 23/8/13

'(Reuters) - Call it the new China Syndrome: Although Asia's biggest economy is slowing down markedly, credit continues to surge. Dead-end projects and dying industries are sucking up an ever-larger portion of new credit, while more productive borrowers are starved for funds. Nowhere is this more evident than in China's shadow banking sector,

The risk of pervasive debt rollovers is that China could follow the path of Japan in the "Lost Decades", creating a permanent class of "zombie borrowers" who have little hope of turning a profit but survive through continual injections of fresh credit.

China's economic growth has slowed for 12 of the last 14 quarters, and 2013 is likely to be the slowest full-year growth since 1990, with the official 7.5 percent target seen ambitious and double-digit growth rates now considered firmly a thing of the past.

"(China's) economic growth since 2009 has been fueled disproportionately by a credit binge that left local governments and their state enterprises with a lot of debt they cannot repay,"

Reuters analyzed 1,166 trust loans issued in 2012, The trust products that Reuters analyzed offer investors returns of 9-12 percent annually. That is even higher than the wealth management products that banks sell, which offer rates of 5-7 percent.By the time the trust company takes its fee, typically worth 1-2 percent of the loan value, the local government or firm may pay up to 15 percent interest for a one- to two-year loan, more than double the bank rate of around 7 percent for similar loans.

Local governments have ways to disguise the fact they are using new loans to repay old ones, said a Beijing-based trust company executive, who asked for anonymity.'

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Tick tock. ;)

Chinese bad loan manager Cinda sits on its own debt mountain

By Elzio Barreto

HONG KONG Wed Nov 27, 2013 4:02pm EST

(L-R) China Cinda Asset Management Co Ltd Vice President Gu Jianguo, Vice President Xu Zhichao, Chairman Hou Jianhang, President Zang Jianfan, Vice President Wu Songyun and Board Secretary Zhang Weidong pose before attending an investors' luncheon in Hong Kong November 25, 2013.

(Reuters) - China Cinda Asset Management's drive to crank profit out of bad loans has come at a cost - a debt mountain of its own.

As it homes in on Hong Kong's biggest initial public offering this year, the distressed debt manager's borrowing has risen twenty-fold in the last three years to more than its maximum market value at listing.

The surge to 104.1 billion yuan ($17 billion) in debt at the end of June came as Cinda went on a spree, scooping up distressed assets from the likes of real estate projects, cement makers, miners and coal companies unable to pay back loans.

The debt pile, revealed for the first time in Cinda's IPO prospectus, doesn't just expose the company to risk factors including short- and long-term interest rate hikes. It means Cinda's reliance on backing from the government and Chinese financial institutions to fuel its growth is set to intensify, even as the sale of up to $2.5 billion in shares attracts some of the world's biggest global investors.

"In the end the question is what are the returns they're going to get on the assets that they're buying," said Charlene Chu, China bank analyst at Fitch Ratings in Beijing. "Will the returns be sufficient to pay back the obligations that they owe?"

By having arrangements with banking sector so they get some commission on new debt written on their distressed assets? New debt at 6% compounds out at a lot of money back over 25 years.


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