Part 5/8:
The Impact of External Factors
Compounding these internal issues are external pressures stemming from the U.S.-China trade war. With tariffs reaching an average of 245% on Chinese goods, companies reliant on imports are seeing supply chains disrupted, resulting in revenue declines and tighter cash flows. This hampers debt repayments and escalates lending risks, particularly in export-reliant provinces.
The economic forecasts are grim: an added 1% default rate on export-linked loans could amount to nearly 100 billion yuan in credit losses, disproportionately affecting major state-owned banks. The potential for annual credit losses of up to 2.7 trillion yuan further underscores the dangerous intersection between trade policies and domestic banking vulnerabilities.