Chinese Lending Anxiety Rises

Bad loan growth, pressure on deleveraging drives exceptional spike in attention to Chinese banks.

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This week, Predata's signal that reflects Chinese concern over financial risk hit its highest level in years. It is hard to say for certain what drove the signal spike, but two developments likely played a role. First, non-performing loans (NPL) in China's regional banks have been rising more than expected as the government seeks to cut excess capacity. Second, as the threat of slowing growth rises, policy is shifting toward easing mode and it seems increasingly likely deleveraging efforts will stall. Unsurprisingly, the drivers of the signal were all web pages for Chinese banks, such as the Industrial and Commercial Bank of China and Industrial Bank Co. Ltd based in Fujian. 

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It makes sense pages such as these would see heightened activity amid lending-related policy developments. But the magnitude of the reaction was exceptional. Past warnings about NPL growth and debates over the risk to growth posed by deleveraging failed to resonate as loudly in the digital realm as this latest round. For whatever reason, Chinese-speaking netizens saw these measures as unusually consequential for the banking sector.