Beijing: The Chinese banking sector is suffering a knockdown as the debt is on the rise amid Covid pandemic phase. It is being said that in the first half of 2020, five major Chinese banks faced a 10% drop; they suffered a loss worth $220 bn. This factor will greatly affect the Chinese economy, and by the year-end, its economy would have dropped at an extreme low in the last four decades, claims the International Monetary Fund.
A few months ago, the Chinese Banking and Insurance Regulatory Commission had published a report about 100 chief commercial banks. In that, it was warned that the burden of Chinese bad debts was over $367.7 bn. Moreover, the report raises concern that the rate of debt for the Chinese commercial banks is about 2.5%, whereas for the rural banks it is about 5%. However, even after this report got published, the Communist Party leaders and officials are making bogus efforts of portraying a positive financial image of the country. But, as the numbers of the biggest Chinese bank exposed its drop, the truth about China’s economic downfall has also been revealed.
Industrial and Commercial Bank of China, China Construction Bank, Agricultural Bank of China, Bank of China and Bank of Communications are known to be the biggest banks in China. Of these, Bank of Communications and the other four of them are known as the ‘Big Four’ in the international banking sector. The combined assets of these banks are known to be more than $15 trillion. Moreover, the Bank of Communications alone holds assets worth $1 trillion. Hence, the jolt of $220 billion that the leading Chinese banks have suffered draws attention.
Even the last decade recession did not financially affect these Chinese banks. But, this time, the Chinese ruling regime poured a lot of money in all of the banking sectors, including the big banks to portray falsely that their economy is functioning smoothly. But, the rising burden of debts from over the past two years and the constant warnings of it on the international prove that the party’s efforts have gone in vain. Now, the shock faced by the most prominent Chinese banks adds to the pressure. Against the background of Covid pandemic, the analysts have significantly drawn attention to the fact that the Chinese regime has decided to stop funding the banking sector and advised the big banks to incur losses.
Despite the burden of ever-rising bad loans and losses suffered by the big Chinese banks, the Chinese regime has ordered to not repay any loans until March 2021. The economic stability of a country is said to be depended upon the financial situation of its bank at large. Furthermore, the increase in debts and losses of that bank creates a threatening situation for the economy. The bank loan cannot be repaid after the financial trade and business in the country halt; this causes an economic downfall. Considering the current numbers of the Chinese banking sector, it seems that the recession of the world’s second-largest economy will be the most intense. Moreover, the warning by the International Monetary Fund about a recording-breaking all-time low from over the last four decades holds major significance.
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