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.

The NPA is S&P’s broad measure of problem loans, inclusive of nonperforming and special-mention loans, as well as estimates of other delinquencies.

S&P economists see tariffs slowing China’s real GDP growth to an average of 3.6% over 2025-2027. Earlier, S&P forecasted the country’s GDP to grow by 4.1%.