CHINESE commercial banks' bad loans increased in the fourth quarter of last year, highlighting pressures the lenders face in maintaining asset quality as the economy slows.

Non-performing loans rose 20.1 billion yuan (US$3.2 billion) to 427.9 billion yuan as of December 31, the China Banking Regulatory Commission said in a report on its website yesterday. Bad loans accounted for 0.96 percent of total lending, up from 0.95 percent in September and 0.17 percentage point lower than a year earlier.

Chinese banks are struggling to keep bad loans in check as the country's economic expansion slows and the housing market cools under government curbs. Lenders' NPL ratio had not increased quarter-on-quarter since the end of 2005, according to Bloomberg News data. Their combined net income jumped 36.3 percent to 1.04 trillion yuan.