18.08.2014 - Chinese banks have increased their profit, but the risks are rising

Commission on regulation of China's banking system published a report according to which the net profit of Chinese commercial banks in the first six months of 2014 totaled 858.3 billion yuan (about 139.6 billion dollars). Thus, the figure is 14% higher than in the same period of the last year.

It should be noted that the quality of the loan portfolio deteriorated. The volume of bad loans totaled 694.4 billion yuan, and increased by 7.5% compared to the first quarter of this year. Coverage ratio is 262.9%. Risk for China's economic growth is also a shadow financing, which in 2012 was approximately 3.35 trillion dollars or 40% of GDP. Considering the growth of risks to the banking system and the crisis in the construction sector, we expect the fall of the Chinese stock market in the medium term.

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