China Central Bank Urges Commercial Banks to maintain Adequate Levels of Profit Margins

To ensure sustainability in supporting the real economy, Chinese commercial banks must maintain a proper level of profit and net interest margins, China's central bank said in a monetary policy implementation report on August 17.

The People's Bank of China stated in a special report column that banks' net interest margins and rate of return on total assets are declining due to lower lending rates.

"China's economic operation is facing many difficulties and challenges," according to the report. "It is critical to emphasize the critical role of banks in serving the real economy and smoothing the virtuous circle of economy and finance."

Banks should have certain financial capabilities and risk buffers, as the exposure of banks' credit risks usually lags a certain time behind the economic cycle, it said.

The central bank also said it is normal to see banks' profit conditions fluctuate with the economic cycle, which should be treated rationally.