Business Maverick: China’s banks rush to raise record debt as credit losses mount

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Banks in China are rushing to boost capital as they prepare for a potential spike in bad loans due to the economic slowdown and spreading housing crisis. A record amount of fresh money has come from financial markets, with banks selling 29% more bonds ...

paying the mortgage on houses that aren’t built yet, raising the pressure on developers, who may face more difficulty selling projects and also have to repay bank loans.

In the year through July 27, lenders had sold a combined 568 billion yuan of Additional Tier 1 debt, which is among the first to absorb losses in times of stress, and Tier 2 bonds. China’s big-four state-owned banks are the major sellers of the bonds this year, according to data on onshore sales compiled by Bloomberg, although local lenders including Bank of Hebei, Chengdu Rural Commercial Bank, and Bank of Shanghai are also selling.

In addition to this, the central government will allow 320 billion yuan generated from the sale of special local bonds to be used to top up the capital of medium- and small-sized banks, the Financial Newslast week, citing an unnamed official with the China Banking and Insurance Regulatory Commission. The amount, including 120 billion yuan in unused funds from last year, is 60% higher than in 2020 when money from the sale of these bonds was first allowed to be used for that purpose.

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