Financial China

Lending to local governments a big concern

  • Published 08 Apr 2010

Smaller banks, especially the city commercial banks, are most at risk from lower quality lending to local government financing vehicles.

The non-performing loan (NPL) ratios of the three banks have shown significant improvement. No wonder, in a loose credit environment. What investors are really concerned about is not how the data may look now, but what would turn up in the future – especially because of a surge in lending to local financing vehicles, called Chengtou or Urban Investment Companies (UICs) (see Big Call).

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