[BEIJING] China's top banking regulator, Shang Fulin, said he expects the amount of non-performing loans at commercial banks to continue to rise, and warned of increased risk from real estate finance, local government fundraising vehicles and unconventional forms of debt, sources with direct knowledge told Reuters.

The sources cited a speech given by Shang, chairman of the China Banking Regulatory Commission (CBRC), during a financial industry teleconference in early May discussing the condition of China's economy and financial industry.

The amount of non-performing loans in the first quarter has already reached 56 per cent of the total amount last year, Shang said, according to the sources. Unconventional forms of credit - which usually refers to instruments like entrusted loans and letters of credit - were also on the rise, he said.

Shang said credit risk had risen among commercial banks in China in the first quarter, with the total number of bad loans at 982.5 billion yuan (S$214.46 billion), up 139.9 billion yuan from the same period last year, bringing the bad loan ratio to 1.39 per cent.

REUTERS