Provincial NPLs

China’s geographical size and massive population have  given rise to significant differences between its provinces, both culturally and economically. Similarly, there is significant variation in the concentration of non-performing loans (NPLs) between the provinces – and more importantly, in the vigor with which they have set about dealing with them.

Total Outstanding Commercial Bank NPLs By Province
Source: CBRC annual reports; National Bureau of Statistics.

The concentration of distressed debt varies greatly between provinces in ways that are seldom proportional to the relative size of provincial economies. Complicating things is that China’s financial regulators publish two different measures of NPLs. The more commonly used of the two is for commercial banks only. However, regulators also publish a figure for the total banking system, which includes bad loans from the commercial banks as well as policy banks, trust companies, finance companies run by conglomerates, the Postal Savings Bank, and rural credit cooperatives. For most provinces, the NPL ratio is fairly similar for both measures, with some exceptions.

China Publishes an NPL Ratio for the Total Banking System, and One for Commercial Banks Only
For more information about dataset, please click here.
Source: CBRC, PBOC.
Total Banking System Bad Loans Are Significantly Higher Than For Commercial Banks Alone
Note: For more information about this dataset, please click here.
Source: CBRC annual reports.

Just as there are differences in the degree of distress among provinces, so is there great variation in just how actively the provinces are disposing of bad loans. Only a handful of provinces disclose data on bad loan disposals. Notably, in some years certain provinces have disposed of more NPLs than they had publicly recognized as having at the end of the previous year. This is where data on total banking system NPLs come in handy. The provincial data on loan disposals measures disposals of NPLs by all banking sector financial institutions, not just commercial banks.

A Sample of Provincial Bad Loan Disposals, Compared with Outstanding Provincial NPLs
Note: For more details about the source of this data, please click here.
Source: Provincial PBOC branches.