China expedites local government debt issuance to bolster capital of smaller banks

• China’s banking regulator has collaborated with the finance ministry and central bank to speed up the issuing of special local government bonds.
• Small and medium-sized banks sold 394.3 billion yuan ($58.4 billion) worth of non-performing loans from January to May.

According to China Banking and Insurance News, China’s banking regulator has collaborated with the finance ministry and central bank to speed up the issuing of special local government bonds to help bolster the capital of small and medium-sized banks.

The state-run tabloid stated late on Sunday, citing an unidentified official at the China Banking and Insurance Regulatory Commission, that the central government will take a number of steps to increase the capitalization of small and medium-sized banks and strengthen their resistance to risks (CBIRC).

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According to China Banking and Insurance News, small and medium-sized banks sold 394.3 billion yuan ($58.4 billion) worth of non-performing loans from January to May, an increase of 107.2 billion yuan over the same period last year.

According to the publication, the provinces of Liaoning, Gansu, and Henan as well as the northern port city of Dalian were each given a combined quota of 103 billion yuan of special local government bond issuances in the first half of 2022 to help small and medium-sized banks build up their capital.

It is anticipated that the total sum of 320 billion yuan would be distributed by the end of August when more local special bond issuance plans are soon to be approved.