Based on public data from the Banking Credit Asset Registration and Transfer Center, the banking industry has issued over 1,080 non-performing loan transfer announcements this year. These include both retail and corporate bad loans being listed in bulk, with transfer participants covering major state-owned banks, joint-stock banks, and local small and medium-sized banks.
During this round of bad asset cleanup, banks have shown clear divergence in their disposal strategies. State-owned giants rely on market-based platforms for batch transfers, while smaller local banks adopt location-specific "full-staff referral and collection" models to reduce bad loan inventories and mitigate operational risks.
In the first half of the year, commercial banks accelerated the pace and intensity of bad asset disposal. Data from the Banking Credit Asset Registration and Transfer Center shows that over 1,080 announcements for bad loan transfers were made industry-wide, covering retail, corporate, and other types of loans. Participants include state-owned banks, joint-stock banks, and local small and medium-sized institutions. A key trend observed is the divergence in disposal approaches: large state-owned banks use market-based platforms for batch transfers, while smaller banks adopt "full-staff referral and collection" strategies tailored to local conditions.
Large State-Owned Banks Scale Up Batch Bad Loan Transfers
This year, the six major state-owned banks have normalized batch transfers of bad assets through market channels. Their regional branches have been actively listing various bad asset projects, positioning themselves as key players in proactive risk cleanup. Since July, branches of Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, China Construction Bank, Bank of Communications, and Postal Savings Bank of China have issued multiple bad loan transfer announcements, expanding the scale of disposal.
Recently, the Shandong branch of Bank of Communications issued transfer announcements for its 2nd to 6th batches of personal bad loans (consumer loans) for 2026, with the total outstanding principal and interest of the five loans reaching 209 million yuan. Meanwhile, several branches of China Construction Bank, including those in Shanxi, Guangdong, and Henan provinces, have also announced bad loan project transfers, targeting retail assets such as personal consumer loans, business loans, and credit card overdrafts. Similarly, the Liaoning, Hubei, and Shenzhen branches of Bank of China have issued transfer announcements, with the focus primarily on personal consumer bad loans. Retail bad loans have become a major focus for large banks in their cleanup efforts.
Data from the National Financial Regulatory Administration shows that in the first quarter of 2026, the non-performing loan ratio for commercial banks was 1.51%, up 1 basis point quarter-on-quarter. State-owned banks had a ratio of 1.22% (unchanged), joint-stock banks at 1.22% (up 1 bps), city commercial banks at 1.85% (up 3 bps), and rural commercial banks at 2.79% (up 7 bps).
Dong Ximiao, chief economist at China Merchants Union and executive director of the Shanghai Institute for Finance and Development, noted three clear trends in bad asset disposal during the first half of 2026. First, the scale of bad loan transfers has grown rapidly. Second, the disposal process has shifted from a periodic action to a routine operation. Third, the focus has moved from primarily corporate bad loans to an equal emphasis on both corporate and retail bad loans. He attributed the accelerated pace and upgraded models to a combination of factors including policy support, banks' internal needs, and market mechanisms. "On the policy front, regulators have provided market stability by expanding pilot programs, extending policy timelines, and reducing transaction costs. Internally, banks urgently need to free up capital locked in bad assets, improve asset quality metrics, and create room for new credit. On the market side, mature platforms like the Banking Credit Asset Registration and Transfer Center and increased participation from diverse buyers have boosted market engagement," Dong explained.
Small and Medium-Sized Banks Adopt "Full-Staff Collection" Model
In contrast to the batch transfer model used by large state-owned and joint-stock banks, smaller banks with limited asset scales and strong regional characteristics are opting for more flexible approaches to resolve existing risks. Recently, Guangzhou Rural Commercial Bank announced a pre-announcement for transferring a large bad credit claim, specifically a bad credit of Guangzhou Gefeishang Trade Co., Ltd. The bank encourages all employees to participate in the transfer, leveraging their local networks to connect with interested buyers or asset management companies. This strategy aims to broaden market reach and improve disposal returns.
Guangzhou Rural Commercial Bank is not the only institution innovating with a "full-staff collection" approach. In February, Shanxi Qingxu Rural Commercial Bank held a mobilization meeting for a special bad asset cleanup campaign, emphasizing the principle of "full-staff linkage" and encouraging all employees to actively engage in the work. Additionally, several other local small and medium-sized banks, including Hubei Xiaogan Rural Commercial Bank, Shanxi Wenxi Rural Commercial Bank, and Shanxi Zuoyun Rural Commercial Bank, have launched similar full-staff collection initiatives in 2026. These efforts focus on consolidating human resources and efforts to tackle bad asset disposal, aiming to reduce bad loan inventories and optimize asset quality.
According to industry insiders, the divergence in disposal paths among banks is due to differences in asset characteristics, market conditions, and operational status. Xue Hongyan, a special researcher at Suzhou Bank, explained that state-owned banks have highly standardized credit assets, allowing them to efficiently dispose of bad loans through batch transfers via the Banking Credit Asset Registration and Transfer Center. In contrast, small and medium-sized banks often have complex large bad credit structures, where batch transfers can result in high discounts, increasing capital pressure. Therefore, they rely on local staff for collection, leveraging regional advantages to improve recovery rates.
Experts also issued risk warnings regarding the long-term effectiveness of the "full-staff collection" model for small and medium-sized banks. Lou Feipeng, a researcher at Postal Savings Bank of China, stated, "Full-staff collection actions can help reduce bad loan scale and improve asset quality in the short term. However, if risk management mechanisms are not strengthened, bad loans may rebound." Lou suggested that banks should shift their assessment focus to pre-loan due diligence and post-loan early warning, address data gaps, enhance their ability to integrate non-traditional credit data for farmers, and improve industry concentration and regional risk limit systems.
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