Chinese banks’ annual credit loses to average $353b in next two years

Nonperforming assets and bad debt are expected to rise.

Chinese banks
‘ nonperforming assets (NPA) ratio may rise to 6.3% through 2027 as
trade disputes
weigh on the economy.

The US trade policy may result in more bad debt from small companies and unsecured lending, said S&P Global Ratings credit analyst Ming Tan.

Tan and S&P forecast annual credit losses to average RMB2.55t (over $353.3b) over the next two years. This is RMB40b higher than estimates published in April 2025.

“U.S. trade policy could hit China’s export-related sectors and employment, resulting in
more bad debt
from small companies and unsecured retail lending,” Tan said

“Meanwhile, domestic macro conditions are still uncertain, dependent on the stabilization of China’s property market, a recovery of consumption, and the resolution of debt burdens for local government financing vehicles,” Tan said.

NPA ratio may range between 5.6% to 6.3% over 2025-2027, according to forecasts by S&P. This is 15 to 35 basis points higher than previous estimates it published on 3 April 2025.

S&P uses the NPA as an extensive indicator for problematic loans, encompassing both non-performing and special mention loans, along with estimations of other overdue debts.

S&P economists predict that tariffs will reduce China’s real GDP growth to an average of 3.6% between 2025 and 2027. Previously, S&P had forecasted the nation’s GDP to increase by 4.1%.