How Does COVID-19 Affect China’s Banking and Insurance Industry?

By TCM China | Jun 23, 2020

At present, China’s epidemic prevention and control situation are further stabilized, but the overseas epidemic is still spreading. The volatility of global financial markets is significantly intensified, and the world economy is likely to fall into recession or even depression. The external input risks faced by China’s banking and insurance industry are increased, mainly in three aspects.

International pandemic’s Impact in the global financial market

When we talk about banking and insurance there is greater uncertainty in external demands and the credit risk of foreign trade companies has been increased. The slowdown in global financial market growth has increased the pressure on external demand. Foreign trade companies have experienced delays, reductions, and even cancellations in export orders. From January to April of 2020, China’s total exports of goods fell by 6.4% year-on-year, which may increase the pressure on foreign trade companies and worsen the quality of related loans.

Secondly, the impact of the COVID-19 international epidemic on the stability of China’s supply chain has had an impact on the global financial markets. Some industries that rely more on overseas supply, such as raw materials and components, are more vulnerable. Some companies may be dragged back in the resumption process. The risks of the operation and default increase, which may also be reflected in the quality of banking and insurance assets in the near future.

Finally, the turmoil in global financial markets has intensified, and the prices of stocks, bonds, gold, and commodities have all dropped sharply. Related risks have had some negative effects on China’s financial markets and financial system through investor confidence and capital flows what directly affects the banking and insurance industry on a global scale.

What we hope from the banking and insurance industry

From the current situation, non-performing loans in the banking and insurance industry have increased, but within the expected range. The stock market, bond market, and foreign exchange market are generally operating smoothly. The impact of the COVID-19 international epidemic on the banking and insurance industry is generally under control.

At present, there is still great uncertainty in the development of the international epidemic situation as well as the economic & financial trends. The China Banking and Insurance Regulatory Commission (CBIRC) will coordinate the epidemic prevention and control, and economic development financial services.

Banking and Insurance future in China

The first measure taken by China Banking and Insurance Regulatory Commission is focused on sticking to the bottom line, further enhance risk awareness, strengthen risk management and control, reduce negative effects, such as the rise of non-performing loans, and lay a better foundation for serving the real economy.

The attention on the financial supports for the implementation of the policy of resuming production is also treated by the commission. To alleviate the difficulty of financing for small and micro enterprises, and to increase the investment in poverty alleviation credit to help overcome poverty.

Finally, the CBIRC urges the bank and insurance institutions to do well in the normalization of epidemic prevention and control, so that the Chinese people could receive financial services safely and conveniently.

TCM Group Global Debt Collection
TCM China

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