The exposure of Shanghai's banks to heavily-indebted Chinese steel merchants is under control, the city's banking regulator said, with a non-performing loan ratio of 1.31 percent.
Chinese banks are pursuing steel traders to recover loans that many borrowers say they cannot repay. The drive to recover the money is a sign of strain on China's financial system at a time when China's leaders are considering launching another package of incentives to boost the economy, and banks are worried about bad debts piling up.
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Steel traders had an overall credit line of 185.3 billion yuan ($29.65 billion) with Shanghai's banking sector at the end of September, the Shanghai bureau of the China Banking Regulatory Commission said in an email on Friday.
Non-performing loans from steel traders stood at 2.4 billion yuan and the non-performing loan ratio was 1.31 percent, the bureau said.
"Right now the risk is under control," the bureau's statement said.
At the end of last year, China's steel industry had a total debt burden of $400 billion. Some of China's leading mills owe 200-300 billion yuan, according to the China Iron and Steel Association.
($1 = 6.2489 Chinese yuan)
(Reporting by Melanie Lee; Editing by Daniel Magnowski)