CX Daily: Pandemic-Era Helping Hand Comes Back to Haunt China’s Banks

Loans /

In Depth: Pandemic-era helping hand comes back to haunt China’s banks

A government-encouraged surge in lending designed to be a lifeline for small businesses during the pandemic has started to worry Chinese banks, as misappropriation has caused the loans to sour at an increasing rate due in part to China’s stubborn real estate slump.

The rise in banks’ nonperforming loan (NPL) ratios for personal business loans (PBLs) shows how gaps in banks’ due diligence can cause funds designed for one purpose to end up being used for something else — in ways that are damaging to lenders’ financial health.