Major Chinese commercial banks had made significant progress in cleaning up balance sheets loaded with bad debt, the China Banking Regulatory Commission (CBRC) announced in a report Friday.

According to the latest statistics released by the CBRC, the country’s major commercial banks held non-performing loans (NPLs) valued at 1.699 trillion yuan (US$204.7 billion), comprising 13.37 percent of their total assets at the end of September.

That compared with total NPLs of more than 2.11 trillion yuan at the beginning of this year, comprising 17.76 percent of the total assets then.

At State-owned commercial banks, the NPL volume and ratio were reduced respectively by 365.4 billion yuan and 4.7 percentage points from the beginning of this year to 1.56 trillion yuan and 15.71 percent.

Meanwhile, the NPL volume and ratio at joint-stock commercial banks were lowered by 47.1 billion yuan and 2.59 percentage points to 140.2 billion yuan and 5.03 percent.

The improvement was mainly due to a massive sell-off of bad assets by the China Construction Bank, Bank of China and Bank of Communications in June, the CBRC said in the report.

However, further improvements this year could be limited by problems in recovering loans for projects that had been delayed or canceled amid government curbs on lending aimed at avoiding over-investment, the regulator said.

The worst problems were in manufacturing, wholesale and retail, and agriculture, areas that accounted for nearly three-quarters of all bad loans, it said, adding that about half of agriculture-related lending in the first three quarters had ended up as ban loans.

The regulator urges commercial banks to further reduce their bad loans, especially the four major State-owned banks, namely the China Construction Bank, Industrial and Commercial Bank of China, Bank of China and the Agricultural Bank of China.

“The four big banks have done a pretty good job of resolving their problems,” said Anthony Wu, chairman and chief economic officer at accounting firm Ernst & Young Far East. “To get this far is already quite an achievement.”

(Shenzhen Daily November 1, 2004)