Due to the coronavirus, banks across China faced growing pressure to cope with bad assets in the first half of this year. On August 25, the China Banking and Insurance Regulatory Commission announced that 1.1 trillion yuan (US$164b) of bad loans were written off, up by 160 billion yuan (US$23.9b) year-on-year. Official statistics showed that the aggregate net profits of Chinese commercial banks dropped to 1 trillion yuan (US$149b) in the first two quarters, down by 9.4 percent on a yearly basis. Regulators have urged banks to amplify loan loss provisions, consolidate capital strength, cut dividend payments and prepare for a possible rebound in non-performing loans. It is urgent for banks to classify assets into different categories and strictly separate the companies that face temporary hardships because of the pandemic from those that have high operational risks.
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