Risks in China's banking sector controllable: Official

BEIJING — The deputy head of China's banking regulator said risks in the sector are generally controllable despite lingering uncertainties.

Wang Zhaoxing, vice chairman of the China Banking Regulatory Commission, told Xinhua that the commission has made headway in the prevention and control of risk.

"More energy has been channeled into dissolving non-performing loans (NPLs)...and violations in financial markets have been contained, with competition more rational and business operation more normal," Wang said, adding that illegal fund-raising cases have dropped substantially.

Bad loans have remained at a low level in China. The NPL ratio of Chinese banks stood at 1.86 percent by the end of May, with stable liquidity and abundant capital and provision.

"Banks' profitability and risk resistance are good compared with global peers, and the international influence is also on the rise," Wang said.

Wang's remarks came amid the country's ongoing campaign to rein in financial risks and de-leverage as a firming economy provides more leeway to such measures, which partly aim to cushion the impacts from the US rate hikes.

Banks and other financial institutions have been subject to stricter supervision, and action has been taken against irregularities, such as shadow banking. Wang noted that the situation remains grim and said the commission that "not a single risk will be neglected and not a single hazard will be let go."

He warned of more defaults from debt-ridden companies, increasing cross-markets and cross-industries financial activities, and sharper fluctuations.

Wang also highlighted banks' role in revitalizing the real economy.

Commercial banks have improved their lending structures, downsizing interbank business and expanding credit to the real economy, Wang said. "Financial support has been strengthened for major national projects and the new economy."

By May, outstanding loans to small and micro businesses were 28 trillion yuan (around $4.11 trillion), up 14.9 percent year-on-year. Outstanding agricultural lending totaled 29.6 trillion yuan, up more than 40 percent from the end of 2012.

Banks also helped cut excess capacity, build affordable houses, reduce corporate burdens, and de-leverage, Wang said.