The world has a lending problem. If anyone has learnt anything from the credit crunch in America, it would be that financial institutions should lend carefully. Carefully with a capital C. Appearently that is not what Chinese lenders are taking into consideration. According to
a recent report by Standard & Poor's Rating Services yesterday, the rate of non-performing loans in China's banking industry has significantly risen over the past year. No doubt that they will be pressured by the government and state-owned companies alike to maintain the quality of their assets or risk the booming economy.
Credit downsizing will be detrimental to China's current economic climate, as sectors such as real estate and exports depend on growth operations capital borrowed from banks to generate revenue. If 'price fixing capabilities' aren't improved in these sectors in the near future, there will be significant downward pressure on the Chinese banking industry with high risks at stake. At the same time, as the government imposes stricter enforcement on macroeconomic controls, banks will find themselves on a tight leash of credit. Again, Chinese banks should lend carefully from now on.
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