Chinese banks have piled up a mountain of bad debt after lending
money to car buyers who can't afford the payments, a senior
researcher told Xinhua on Tuesday.
The bad bank debt relating to car loans has reached 100 billion
yuan (US$12.5 billion), with 81 percent owned by the "Big Four"
state banks namely the China Construction Bank, the Bank of China,
the Industrial and Commercial Bank of China and the Agricultural
Bank of China, said researcher Chen Xinnian with the National
Development and Reform Commission.
He blames the lack of a sound individual credit system in China
for the bad loans.
Some car buyers even provided false information in their loan
applications, he said.
To prevent their bad debts from swelling, banks have become
increasingly cautious in extending car loans and the evaluation of
personal credit ratings.
He said that the increasing demand for bank loans for expensive
items such as houses and cars has helped boost China's economy but
they need to be supported by a sound credit rating system.
"The establishment of a personal credit rating system is
urgently needed to secure the healthy growth of consumer credit,"
Chen said.
(Xinhua News Agency October 24, 2006)