Commercial banks in China continued to see declines in both non-performing loans (NPLs) and their ratio in total outstanding loans in the first quarter, said China's banking regulator on Tuesday.

The NPL ratio of lenders, including foreign banks in China, was 2.04 percent at the end of March, down 0.38 percentage points from the beginning of 2009, said the China Banking Regulatory Commission (CBRC) in a statement.

The decrease followed last year's sharp fall in NPL ratio, which was 2.45 percent at the end of 2008, down 3.71 percentage points from a year earlier.

Outstanding bad loans stood at 549.5 billion yuan (US$80.3 billion) at March end, 10.8 billion yuan less than this year's beginning, said the CBRC.

By the end of March, banking institutions held a total asset of 69.4 trillion yuan in China, up 25.1 percent from a year earlier, according to the banking watchdog.

It said total liabilities of banking institutions in China were 65.5 trillion yuan at the end of March, up 25.4 percent from a year earlier.

There should be broader regulation of financial institutions and markets and tighter risk control to avoid losses that were incurred amid the global financial crisis, said CBRC vice chairman Jiang Dingzhi at a forum on Tuesday.

Chinese banks are in a relatively better position than their western peers to withstand the financial tumults as they had overall limited exposure to investments related to sub-prime loans in the United States, where the financial crisis originated.

The government has adopted a moderately easy monetary policy to encourage more credit supply as a way to spur economic growth since late last year, sparking worries about more bad loans.

In March alone, new loans issued in Chinese currency reached 1.89 trillion yuan, the third straight month that new loans exceeded 1 trillion yuan and an increase of 1.61 trillion yuan from last March, central bank data show.

Outstanding bad loans of foreign banks in China rose 1.3 billion yuan from the 2009 beginning to 7.4 billion yuan at March end, said the CBRC. Their NPL ratio increased 0.26 percentage points to 1.09 percent.

(Xinhua News Agency April 15, 2009)