Beijing, China – As China’s property market faces a prolonged downturn, the country’s largest state banks are experiencing a hit to their financial health due to an increase in bad loans.

One of China’s major banks, Bank of Communications Co., recently disclosed that its ratio of bad loans related to the property sector surged to 4.99% at the end of last year, up from 2.8% in the previous year. Despite a decrease in overdue mortgages, the bank saw a significant rise in special mention loans for the property segment, signaling a potential increase in non-performing loans.

The escalation in bad loans within the property market reflects the challenges faced by Chinese banks amid the economic slowdown and the ongoing trade tensions with the United States. As property prices decline and the market cools off, banks are grappling with the repercussions of a weaker real estate sector on their balance sheets.

The impact of the property downturn is not only limited to Bank of Communications Co. but is also being felt across other major state banks in China. As bad loans linked to property continue to rise, financial institutions are under pressure to address the growing risks within their loan portfolios and take necessary measures to mitigate the impact on their overall financial stability.

Analysts suggest that the surge in bad loans within the property sector could potentially weigh down on the profitability of Chinese banks in the coming months. The need for proactive risk management strategies and effective loan recovery mechanisms has become paramount as banks navigate through the challenges posed by the weakening property market.

Overall, China’s banking sector is facing a tough road ahead as it grapples with the aftermath of the property downturn and seeks to strengthen its financial resilience in the face of mounting risks. The ability of Chinese banks to adapt to the changing market conditions and implement robust risk management practices will be crucial in determining their long-term sustainability in a challenging economic environment.