Risks in China's banking system controllable even as bad loans rise: PBOC Zhou

BEIJING (Reuters) - Risks in China's banking system are controllable even as bad loans increase, said the governor of the country's central bank.

Lenders have adequate capital, People's Bank of China (PBOC) Governor Zhou Xiaochuan said. The PBOC published the comments, made at a G20 meeting in Washington earlier this week, on its website on Sunday.

Chinese banks extended 948.7 billion yuan ($142 billion) in net new yuan loans in August, more than double the figure of the previous month.

Credit growth is fast, and that is a reflection of China's efforts in boosting growth amid a weak global economy, Zhou said.

But as the global economy gradually heads towards a recovery, China will have to control credit growth, he added.

Analysts have attributed a substantial part of the new lending growth in August to strong mortgage demand.

Chinese property prices have risen sharply in the past year, drawing the attention of the central government, and a major price correction would add to strains on banks already wrestling with souring loans.

The non-performing loan rate in the banking sector increased to 1.75 percent at end-June from 1.67 percent at the end of last year, official data showed.

Zhou said China's economy continues to grow within a reasonable range, with some important economic indicators showing signs of improvement.

The government is due to publish September's lending data in the coming week and third-quarter gross domestic product later this month.

China's economy grew 6.7 percent in the second quarter from a year earlier, unchanged from the first quarter at the slowest pace since the global financial crisis.

($1 = 6.6685 Chinese yuan renminbi)

(Reporting by Ryan Woo; editing by John Stonestreet)

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