Part 4/8:
The dependency of banks on mortgage lending has turned damaging as the real estate market falters. Once viewed as a potential growth engine for China’s economy, the property sector now poses significant challenges to banks. Rising bad loan ratios, particularly among mortgages, are indicative of a dangerous trend where borrowers abandon their loans as housing prices continue to decline, escalating losses for financial institutions.
Banks are further squeezed by an influx of non-performing loans, which reached approximately 1.57 trillion yuan across the six major state banks by the end of the first quarter of 2025. Economists warn that if the government does not intervene decisively, this could lead to a massive debt crisis that encapsulates the entire sector.