Corona virus kills Chinese banks … defaulting loans of one trillion dollars

Ratings agency Standard & Poor’s Global Credit Rating indicated on Thursday that China’s banking sector may face a non-performing loan increase of up to 7.7 trillion yuan ($ 1.1 trillion) in 2020 unless the outbreak of the Coruna virus begins to recede before April.

In a report released today, Standard & Poor’s warned that “while the outbreak of the Corona Virus disrupts production in China, some companies and individuals will find it difficult to repay the debt.”

China is struggling to contain the epidemic that has killed nearly 2,100 people and infected more than 75,000, and has resulted in severe travel and transportation restrictions that have led to the closure of many companies and damaged supply and demand for goods and services.

In the context of efforts to mitigate the impact of this, the financial services regulators are urging banks to reduce interest rates and extend loan deadlines for specific companies that have been affected by the outbreak.

Local authorities are putting up a list of company names to help the People’s Bank of China (the central bank) inject cheap loans worth 300 billion yuan to companies affected by the virus across the country.

“We expect China to ease the criteria for defining bad loans to help affected companies and societies,” the agency added.

The International Monetary Fund warned, on Wednesday, that the Corona virus has already impeded economic growth in China, and that further spread to other countries may impede an expected recovery, but “extremely fragile” for the global economy in 2020.

In a memo prepared for G20 finance ministers and central bankers, the global lender envisioned a wide range of risks to the global economy, including the rapid spread of the Corona virus and the escalation of US-China trade tension again, along with natural disasters linked to climate.

Finance ministers and central bank governors of the top 20 economies are due to meet in Riyadh early next week, amid ongoing uncertainty about the effect of the coronavirus known as Covid-19.

The IMF said that its expectations in January for a growth of 3.3% for the global economy this year are still valid, which are expectations that include an increase from 2.9% in 2019, which was already subject to a downward revision of 0.1 percentage points from the October forecast.

But he said the recovery will be limited and that the risk of an economic downturn remains more likely.

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