China—cross border banking and finance guide
Produced in partnership with King & Wood Mallesons
China—cross border banking and finance guide

The following Banking & Finance guidance note Produced in partnership with King & Wood Mallesons provides comprehensive and up to date legal information covering:

  • China—cross border banking and finance guide
  • Loan market and developments
  • Lending
  • Security and guarantees
  • Enforcement
  • Intercreditor issues
  • Governing law and disputes

Loan market and developments

Please provide a brief overview of the current state of the loan markets in your jurisdiction and any significant recent market developments.

Reviewing 2018 and 2019, ‘de-leveraging’ and ‘risk prevention’ remain major themes in terms of financial policies in China.

The structural reform of the financial supply-side has gradually taken place. New regulations continue to be released, for example: financial holding company regulatory measures were introduced, wealth management subsidiaries were established successfully, asset management business transformation accelerated, loan interest rate pricing mechanisms were further optimised to lower enterprises’ financing costs, and industry and markets opened up further to support direct financing development.

Risk management strengthened

Banks’ risk management is under great pressure, as financial regulation tightens and the economy slows. A rebound in non-performing loan (NPL) ratios are also one of the most concerning areas. According to the China Banking and Insurance Regulatory Commission, the NPL ratio for rural and city commercial banks keeps rising and jumped to 2.30% in the middle of 2019, the highest level of the NPL ratio since 2009 and the first time that figure exceeded 2.0%. It is expected that small- and medium-sized banks with high credit risk will accelerate risk exposure and clearing. The rapid expansion of the real-estate sector is another source of concern, as a collapse in real