MNI POLICY: China Should Ramp Up Bad Loan Disposal: Official

China's financial industry should hasten the disposal of non-performing assets, prevent a resurgence of high-risk shadow banks and steadily expand the sector's opening to outside investment, Guo Shuqing, Chairman of the China Banking and Insurance Regulatory Commission, wrote in an article on the central bank's website.

Banks should also formulate realistic income and profit plans, as well as increasing provisions and capital replenishment, Guo said.

Guo warned that companies, residents and governments could all increase debt levels in an environment of loose liquidity after recent stimulus, and the expectation of lower interest rates may encourage leveraged trading and speculation leading to a new round of asset bubbles.

Guo pointed to the rebound in real state prices in some areas as an example of potential bubbles. Borrowers with poor credit may use policies such as deferred repayment to escape debts, and high-risk shadow banking may rise, he said.

Regulators should maintain high pressure on high-risk businesses, separate on and off-balance sheet businesses and have a clear distinction between savings and investment products, Guo said.