CBIRC Says Impact of COVID-19 on China’s Banking Sector under Control Despite Rise in Non-performing Loans

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The China Banking and Insurance Regulatory Commission (CBIRC) says that the ongoing spread of the COVID-19 pandemic will have a limited impact on the domestic banking and insurance sectors.

CBIRC announced on 18 May that at present China’s banking sector is seeing a rise in its non-performing loans, but that the scope of the rise is within the scope previously projected.

According to CBIRC China’s stock, bond and forex markets are still “operating steadily,” and the “impact of the overseas pandemic on the banking and insurance sectors is controllable overall.”

“At present China’s banking and insurance sectors face a rise in the ingress of external risk, mainly in the form of significant uncertainty in terms of external demand, and a rise in the credit risk of foreign-trade enterprises.

“The overseas pandemic comprises a shock for the stability of China’s supply chain, and some industries that are more reliant on overseas supplies of raw materials and spare parts are subject to pronounced impacts. In future this could be reflected by the asset quality of banks.

“Turmoil on overseas financial markets is intensifying, and related risk comprises a negative impact on China’s financial markets and financial system via the channels of investor confidence and capital flows.”

CBIRC said that the next step would be to “increase risk awareness, strengthen risk regulation and control, and reduce the rise in non-performing loans.”

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