China’s central auditing authority has sounded the alarm on a surge of bad debt at small banks around the country, raising the question of whether Beijing will continue to bail out struggling lenders or eventually allow some to go bankrupt.
The National Audit Office said that some banks in Henan province in central China had recorded 40 per cent of their loan books as bad debt by the end of 2018, the first official disclosure in decades of such high rates of toxic assets.
The province was home to 42 banks with non-performing loan rates that had “crossed the warning line” of 5 per cent, 12 banks with rates above 20 per cent, and “a few” with NPLs exceeding 40 per cent, according to the audit authority’s report.
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