Commercial banks must rein in bad assets

The nonperforming loans (NPLs) of China's commercial banks have grown rapidly in recent years, exerting enormous pressure on the banks' asset quality, and posing a big challenge to their operation and management. And the resultant accumulation of credit risks is detrimental to the stable development of the economy.

As such, how to improve the risk management of commercial banks and address their NPL problem are major issues facing the banking sector.

The NPLs of commercial banks have three characteristics. First, following a quick hike between 2013 and the third quarter of 2016, the NPL ratio of commercial banks has stabilized at 1.74 percent over the last four quarters, easing some pressure on the banks. Second, the manufacturing and retailing sectors are most vulnerable to NPLs, as they account for more than 60 percent of the total NPLs. And third, NPLs show a strong regional feature - they have peaked in developed areas such as Zhejiang, Jiangsu, Shanghai and Guangdong, and are worsening in less-developed areas such as Heilongjiang, Jilin, Liaoning and Gansu provinces and the Inner Mongolia autonomous region.