Three Years Post-Evergrande: China’s Major Banks Battle Rising Property Risk Exposure Amid Struggle to Stabilize Economy

Three years post the Evergrande debacle, crucial Chinese banks are having a tough time limiting their exposure to property-related risks. Chinese banks are dealing with a high level of bad loans as they strive to steady the country's economy and ward off financial dangers.

Banks in China that hold significant importance in the system are continuing to struggle with a large number of non-performing loans in their real estate portfolios. This comes as the persistent decline in the property market hampers the nation's attempts to stabilize its economy and ward off financial threats.

Banks are dealing with a high ratio of non-performing loans (NPLs) – a measurement of a bank's asset quality and credit risks – in the real estate industry. Based on a review of their midyear financial statements by the Post, the median NPL ratio stands at 2.79 per cent among the 18 leading banks.

The ratio of property-related non-performing loans among China's four major state-owned banks – namely the Industrial and Commercial Bank of China (ICBC), the Agricultural Bank of China, Bank of China, and the China Construction Bank – stood at 5.2 percent on average.

This indicates a minor decline from 5.5 per cent at the conclusion of the previous year, yet it is still significantly elevated in comparison to the general average NPL ratio of 1.56 per cent as of the end of June.

The major four banks that are responsible for the majority of China's problematic real estate loans are included in the Bank for International Settlements' list of "global systemically important banks".