Core Insights - The overall asset quality of the banking industry in China remained stable in the first half of 2025, with a slight decrease in the non-performing loan (NPL) ratio, although there were regional disparities in credit quality [1][2][4] Group 1: National Overview - As of June 2025, the average NPL ratio for commercial banks in China was 1.49%, with 16 out of 25 regions reporting an increase in NPL ratios since the beginning of the year [1][2] - Major state-owned banks and joint-stock banks reported NPL ratios of 1.21% and 1.22%, respectively, showing a decline or stability compared to early 2025 [2][7] - Regions such as Gansu, Shanghai, Heilongjiang, and Hebei achieved reductions in both NPL ratios and NPL balances, indicating improved asset quality [2][3] Group 2: Regional Performance - Gansu's NPL ratio decreased from 2.56% at the end of 2024 to 2.31% by mid-2025, with a reduction in NPL balance from 742.7 billion to 695.44 billion, marking it as one of the regions with the largest decline [2][3] - In Shanghai, the NPL ratio fell from 1.02% to 0.90%, with a decrease in NPL balance of approximately 104 billion [3] - Other regions like Tianjin, Hebei, and Chongqing also reported declines in NPL ratios, contributing to a steady improvement in asset quality [3] Group 3: Areas of Concern - Six regions, including Guangdong, Zhejiang, and Jiangsu, experienced slight increases in NPL ratios, with Guangdong's ratio rising to 1.62% and an NPL balance increase of approximately 327 billion [4][5] - The inland regions, such as Guizhou and Sichuan, also saw minor increases in NPL ratios, indicating potential pressure on asset quality in these areas [5] - Analysts suggest that the temporary rise in NPL ratios in economically developed regions is linked to large credit bases and the gradual clearing of risks in certain industries [5][6] Group 4: Risk Management and Future Outlook - The banking sector is actively addressing non-performing assets, with a significant increase in the scale of NPL transfers, reaching 667 billion in the second quarter of 2025, a year-on-year increase of 108.8% [6] - The focus on retail and small business loans has led to increased pressure on asset quality, but new fiscal tools and active capital markets are expected to improve banking performance in the latter half of the year [6][7] - Reforms in small and medium-sized banks are progressing, with several provinces accelerating the restructuring of rural credit cooperatives, which is expected to help mitigate risks [7]

Core Viewpoint - The overall asset quality of the banking industry in China remained stable in the first half of 2025, with a slight decrease in the non-performing loan (NPL) ratio, although there were regional disparities in credit quality [1][2]. Summary by Sections National Overview - As of June 2025, 25 regions reported their NPL data, with 16 regions showing an increase in NPL ratios compared to the beginning of the year. However, most regions remained below the national average NPL ratio of 1.49%, indicating that risks are generally controllable [1][2]. - The major state-owned banks and joint-stock banks reported NPL ratios of 1.21% and 1.22%, respectively, both showing a decrease or stability compared to the beginning of 2025 [2][7]. Regional Performance - Regions such as Gansu, Shanghai, Heilongjiang, and Hebei achieved a reduction in NPL ratios, with Gansu's NPL ratio decreasing from 2.56% at the end of 2024 to 2.31% in mid-2025, a decline of 0.25 percentage points, and a reduction in NPL balance by approximately 4.7 billion [2][3]. - Shanghai's banking sector saw its NPL ratio drop from 1.02% at the beginning of the year to 0.90% by June, with a reduction in NPL balance of about 10.4 billion [3]. Areas of Concern - Six regions, including Guangdong, Zhejiang, and Jiangsu, experienced slight increases in NPL ratios, with Guangdong's ratio rising by 0.1 percentage points to 1.62% and an increase in NPL balance of approximately 32.7 billion [4][5]. - Inland regions like Guizhou and Sichuan also saw increases in NPL ratios, with Guizhou's ratio at 1.77%, up by 0.09 percentage points, and an increase in NPL balance of about 6.8 billion [5]. Risk Management and Asset Disposal - The banking sector is actively managing risks, particularly in retail and small micro-enterprise loans, with pressures noted in these areas [6]. - The second quarter of 2025 saw a significant increase in the scale of non-performing loan transfers, with the total unpaid principal amount reaching 66.7 billion, a year-on-year increase of 108.8% [6]. - State-owned banks and joint-stock banks maintained strong performance, with state-owned banks' NPL ratio decreasing slightly to 1.21% [7].