MNI POLICY: China Bank NPLs Seen Rising in 2019: Survey

     BEIJING(MNI) - Commercial Chinese banks' non-performing loans are set to

rise this year as the economy deteriorates, in a trend which could continue for

three to five years, according to a survey by China Orient Asset Management Co,

one of four big state-owned Chinese asset management companies.

     Here are main points from the survey of 405 respondents from banks and

asset managers, and 63 economists, from Nov 20 to Dec 2, 2018.

     --Some 50.4% of participants from banks and AMCs predicted rising NPLs this

year, with 40.45% expecting the bad loans ratio to grow most in the property and

construction sectors. Another 49.4% saw NPLs increasing at a moderate pace over

the next three to five years, pushed higher by a runoff in industrial

over-capacity, a difficult economic environment and a soft property market.

     --Some 51.5% of bank participants said real credit risks would be higher

than indicated by published NPL ratios in 2019, as lenders massage down figures.

Dealing with NPLs is a more urgent task this year than last, according to 53%.

     --The central bank will keep benchmark interest rates unchanged this year,

according to 44.2% of financial institution participants, while 18% thought the

PBOC would cut rates once. A majority doubted looser monetary policy could

significantly improve banks' asset quality.

     --Yuan trade will be volatile, with the currency trading between 6.75-7.0

to the dollar for most of the year, 60% of participants from financial

institutions predicted. According to China Orient, the yuan should suffer

moderate depreciation pressure and its volatility band expand, due to trade talk

uncertainty and bigger cross-border capital flows as the country opens up its

financial sector.

     --Local government debt is a major risk, 34.9% of economists responded.

Risks will intensify as land transfer fees and the economy grow at a slower

pace. Some 46% of economists thought local government should be the top target

for deleveraging campaigns.

--MNI London Bureau; +44 203 865 3829; email: jason.webb@marketnews.com

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