China's top banking regulator warns of bad debt, local real estate bubbles

Reuters reports that China's top banking and insurance regulator said banks should guard against a rise in non-performing assets, as the country rolls back some of the relief measures implemented during the pandemic to help firms withstand the fallout.

"The default rate for some large and medium-sized enterprises has risen, and the credit risks at banking institutions has intensified," Guo Shuqing told a financial forum in Shanghai via a video message.

He said a growing trend of local real estate bubbles remained "serious".

Corporate bond defaults have risen sharply in China in recent years, reaching $14 billion in 2020, according to the Institute of International Finance. Chinese banks extended a record $3 trillion in new loans in 2020, according to data from the People's Bank of China.

Investors should also be aware of potential investment losses on financial derivative products, commodity-linked futures, and rising Ponzi schemes, Guo said.

The regulator will also resolutely clean up illegal security issuance activities and fend off the pick-up in shadow banking activities, Guo added.