Bad loans at Wenzhou banks surge as China's economy slows-report

SHANGHAI, Oct 9 (Reuters) - The non-performing loan (NPL)ratio for banks in China's entrepreneurial hub of Wenzhou hassurged this year, official media reported on Tuesday, the latestsign of declining credit quality at Chinese banks amid a slowingeconomy.

The NPL ratio for banks in Wenzhou reached 3 percent by theend of August, up 1.64 percentage points since the start of 2012and 0.15 percentage points since the end of July, the officialChina Securities Journal reported, citing unnamed officials inWenzhou. At end-August 2011, the ratio was only 0.37 percent.

Banks and regulators do not officially publish city-levelNPL ratios, but a state media report in July said that Wenzhou'send-June NPL ratio of 2.69 percent was the highest in a decade.That would make the latest figure a newdecade-high.

Wenzhou, in Zhejiang province on China's east coast, isfamous as a center of small factories run by privateentrepreneurs, as well as for the vibrant grey-market lenderswho finance them.

The city is widely seen as a leading indicator of the stateof China's non-state economy. A string of bankruptcies last year- including suicides and disappearances by entrepreneurs unableto repay underground loans - prompted Premier Wen Jiabao tovisit the city, where he urged banks to lend more to smallbusinesses.

The report did not name specific banks, but said that theNPL ratio in Wenzhou for an unnamed, nationwide joint-stockbased in southern China was 9.09 percent in August, up 1.21percentage points from July.

In March, China's cabinet approved the launch of a financialreform pilot project in Wenzhou, which aims to bringunderground, privately-financed lending institutions out of theshadows.

Wenzhou's non-peforming bank loans totaled 21 billion yuan($3.34 billion) by the end of August, the paper reported.

($1 = 6.2872 Chinese yuan)

(Reporting by Gabriel Wildau; Editing by Eric Meijer)

((Gabriel.Wildau@thomsonreuters.com)(+86 21 6104-1783)(ReutersMessaging: gabriel.wildau.thomsonreuters.com@reuters.net))


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