The non-performing loan (NPL) ratio of commercial banks in China fell by 4.28 percentage points in the first nine months this year to an average of 8.58 percent by the end of September, the banking watchdog said on Monday.

"All the commercial banks are continuing to upgrade their loan quality in general," the China Banking Regulatory Commission (CBRC) said in a statistical report.

Commercial banks in China, including foreign institutions, reported their outstanding non-performing loans (NPLs) stood at a combined 1.28 trillion yuan (US$158 billion) by the end of September.

Included were 374.24 billion yuan (46 billion dollars) of loans classified as "losses" by the international standard -- referring to loans whose principal and interests cannot be recovered.

The CBRC report said that the NPL ratio of the big four state-owned commercial banks, dropped 5.45 percentage points to 10.11 percent in the nine-month period, while that of the 12 smaller state shareholding banks fell 0.45 percentage points to 4.51 percent.

The decrease in the Big Four, which includes the Industrial and Commercial Bank of China (ICBC), Bank of China, China Construction Bank and Agricultural Bank of China, was largely owed to the ICBC -- China's biggest bank -- who sold as much as 459 billion yuan of NPLs to the country's asset management companies in preparations for joint-stock reform and a stock market debut.

The CBRC also posted modest reduction of NPL ratios at the country's city and rural commercial banks, which mainly provide financial services for local economic expansion.

The NPL ratio of foreign banks in China declined 0.16 percentage points to 0.92 percent in the first nine months this year, it added.

(Xinhua News Agency November 1, 2005)