In the fourth quarter, Chinese banks have accelerated the disposal of non-performing assets, with the scale of non-performing asset packages reaching tens of billions or even hundreds of billions. The announcements of non-performing loan transfers far exceed the average level of the past four years. Furthermore, banks have started directly disposing of assets such as houses and liquor. Analysts believe that the ongoing downturn in the Chinese economy and the pressure on banks’ operations are the main reasons for this wave of selling off non-performing assets.
According to the China Banking Regulatory Commission, as of the end of the third quarter of 2025, commercial banks’ non-performing loan balance was 3.5 trillion yuan, an increase of 88.3 billion yuan from the previous quarter. The non-performing loan ratio of commercial banks stood at 1.52%, up by 0.03 percentage points from the previous quarter.
Moreover, in the first three quarters, the average capital profit rate of commercial banks was 8.18%, lower than 8.77% in 2024; and the average asset profit rate was 0.63%, also lower than 0.68% in 2024.
On November 14, a total of 8 announcements of non-performing loan transfers were made by banks, with amounts exceeding 8.5 billion yuan, most of which were overdue for over 5 years. As of November 14, there have been a total of 1166 announcements of non-performing loan transfers this year, far exceeding the average of around 680 announcements per year over the past four years.
For example, China Minsheng Bank Credit Card Center announced the transfer of the 6th phase of personal non-performing loans (credit card overdrafts) in 2025, with a non-performing loan amount of 5.14 billion yuan and 1856 days overdue.
It is noteworthy that the scale of non-performing asset packages reaches tens of billions or even hundreds of billions. In October, Bohai Bank transferred nearly 50 billion yuan in principal debt assets, reaching a total scale of nearly 70 billion yuan including interest and penalties; Guangzhou Rural Commercial Bank listed 18.9 billion yuan in credit loan assets for disposal.
According to Securities Times, in the first half of 2025, bulk transactions of personal non-performing loans amounted to 107.6 billion yuan, doubling compared to the same period last year. Industry insiders predict that the annual transaction volume in 2025 will exceed 200 billion yuan.
From 2020 to 2024, the scale of disposing of non-performing assets by financial institutions in the Chinese banking industry has remained above 3 trillion yuan for five consecutive years, reaching a record high of 3.8 trillion yuan in 2024.
In addition to large-scale transfer of non-performing loan rights, banks have also started directly selling properties.
Data from platforms such as Alibaba and JD show that several banks including Agricultural Bank of China, Construction Bank, and Bank of Communications, are listing properties for sale in bulk, with some properties priced 25% lower than the market value.
Recently, the Guangzhou Branch of Jiujang Bank listed a residential property on Sihui Nan First Street in the Huangpu District of Guangzhou for auction, with a starting price of about 798,400 yuan. However, data from Shell Find House shows that the average listing price for the area in October was 33,400 yuan per square meter, making the total price of the property around 2.24 million yuan, with the starting price set at over 70% below market value.
The “Yuchai One” community in Lanzhou Rural Commercial Bank has put up hundreds of residential properties for auction at half the market price but faced zero bids leading to the auction being unsuccessful.
The trend of banks directly selling properties is not limited to Lanzhou Rural Commercial Bank. State-owned banks such as Agricultural Bank of China have listed 3,436 properties for direct sale, while city commercial banks like Jilin Bank have listed over 2,000 properties, and agricultural credit systems like Guangdong Rural Credit have listed over 12,000 properties.
In addition to “direct supply housing,” banks are diversifying the forms of asset disposal. The Ningcheng Branch of Inner Mongolia Rural Commercial Bank listed debt-for-liquor for sale with a starting price of 63,900 yuan, and the auction is scheduled for November 16; The Kalaxingqi branch listed chicken blood stone for auction with a starting price of 160,000 yuan.
A city commercial bank official told Economic Daily that a large number of properties that were unsold in the auction market eventually turned into assets on the bank’s balance sheet through debt-for-asset swaps, creating a sizable stock of assets. The bank transitions from a creditor to a property owner, with its active selling actually reflecting passive receipt of assets returned from auctions.
According to Ke Ruiyan Research Report, in June 2025, the supply of auctioned properties reached a new high of 32,000 units for the year, but the market’s capability to absorb them was significantly inadequate. Even though the average starting discount rate for auctioned properties was 28.4%, the average final discount rate reached only 31.3%.
On October 27, at the 2025 Financial Street Forum Annual Meeting, Li Yunze, Director of the China Banking and Insurance Regulatory Commission, stated the commitment to firmly hold the bottom line of preventing systemic financial risks. This has been a shared sentiment over the past five years, reiterated by former chairman of the China Banking and Insurance Regulatory Commission Guo Shuqing, former governor of the People’s Bank of China Yi Gang, and the current governor, Pan Gongsheng.
However, industry insiders analyzing this wave of offloading non-performing assets see signs of an emerging systemic financial risk in China. First Financial Daily reported that industry insiders generally believe that the drivers behind this wave of bank asset disposal are multifaceted but predominantly two factors.
One is the macroeconomic downturn, weakening the recovery capabilities of certain industries and local projects. Some existing loans have been continually aged on the books, deteriorating liquidity and recovery expectations gradually.
Second, regulatory focus on asset quality, provisioning coverage, and capital adequacy has been increasing, leading banks to adjust strategies passively or actively to meet dual requirements of capital and risk management. Bai Wenxi, Vice Chairman of China Enterprise Capital Alliance, stated that “banks currently face greater regulatory and assessment pressures.” Non-performing loan recognition is becoming stricter, end-of-year provisions and capital adequacy ratio assessments are nearing, motivating banks to quickly downsize on paper.
Data from Enterprise Early Warning shows in 2024, 199 small and medium-sized banks in China were deregistered, mostly rural financial institutions, far exceeding the total for 2021 to 2023.
Analysts believe that three primary factors are driving the financial crisis in China. Firstly, the ongoing sluggishness in the real estate market has weakened the value of bank assets related to mortgage loans and restricted real estate financing income, putting pressure on banks.
Secondly, the continuous rise in local government debt has exacerbated financial system fragility, as many banks hold municipal bonds and related instruments.
Thirdly, the collapse of shadow banking institutions that provided credit outside traditional bank channels has resulted in significant wealth shrinkage, undermining investor confidence and liquidity. These pressure factors combined intensify overall economic stress, weakening the resilience of the Chinese financial system.