FT Confidential Research
source from https://www.ft.com/content/515cb168-8e39-11e7-a352-e46f43c5825d

Chinese underground lenders report falling bad debt levels

FTCR China Underground Lending Index at 7-month low as volume growth slips

SEPTEMBER 1, 2017 by: FT Confidential Research
The FTCR China Underground Lending Index fell to a seven-month low in August as lenders reported a slowdown in business and a drop in the interest rates they charge. Although the headline index fell 3.1 points this month and was below the average of 59 for the previous 12 months, this was the strongest August reading since 2014.

Consumers and the real estate sector were cited as the biggest sources of demand for loans while consumers were cited as the largest source of bad debt. Overall, however, lenders said bad debt levels fell at their fastest pace in the history of the survey.

• The FTCR China Lending Volume Index fell from 56.5 to 55.2, with the proportion of respondents reporting a drop in business rising from 21.7 per cent to 28.4 per cent.
• Our lending outlook index fell 0.5 points to 64.2.
  

• Our Lending Rate Index suggested interest rates on underground loans fell for the first month since September 2016.
• The index dropped 5.8 points to 49.3 and was 1.5 points lower year on year. Despite the drop, 77.6 per cent of respondents said interest rates were unchanged compared with the previous month.
• Our Interest Rate Outlook Index also fell, losing 4.5 points to 47.3.
  

• Our index measuring bad debt levels among underground lenders fell sharply in August.
• The FTCR China Bad Debt Index was down 4.6 points to 31, the lowest reading for the index since our survey began in 2013.
  

• By sector, consumers and real estate were named as the top sources of demand for credit, each cited by 62.7 per cent of respondents. They were followed by manufacturing (37.3 per cent) and small business (35.8 per cent).
• Consumers were cited as the greatest source of credit risk by 41.3 per cent of respondents, followed by real estate (39.7 per cent), manufacturing (28.6 per cent) and the financial sector (19 per cent).
• The FTCR China Underground Lending survey is based on interviews with more than 60 underground bankers. For further details click here. This report contains the headline figures from the latest Underground Lending survey; the full results are available from our Database.
  

FT Confidential Research is an independent research service from the Financial Times, providing in-depth analysis of and statistical insight into China and Southeast Asia. Our team of researchers in these key markets combine findings from our proprietary surveys with on-the-ground research to provide predictive analysis for investors.