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China debt crunch

China warns regional banks to brace for tidal wave of bad debt

Smaller lenders urged to shore up capital as pandemic relief expires

The coronavirus came on the heels of small businesses in China suffering from the economic slowdown in 2019 from the U.S. trade war, contributing to mounting nonperforming debt.   © Reuters

BEIJING -- China's small regional banks are fast approaching a surge of nonperforming debt that threatens to undermine the financial health of the vulnerable lenders.

As part of the country's coronavirus stimulus package, the government allowed small to midsized enterprises to defer principal and interest payments on loans. The extensions were applied to 6.6 trillion yuan ($1 trillion) as of the end of December, according to the China Banking and Insurance Regulatory Commission.

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