With bad loans and repayment collateral in focus, Chinese banks are increasingly using satellites to evaluate their clients’ terrestrial assets, mounting a hi-tech offensive to safeguard against rising credit risks.

China Merchants Bank and Shanghai Pudong Development Bank started making use of satellites this year, following a 2022 launch by Ping An Bank and a 2020 move into satellite remote-sensing technology by Zhejiang E-Commerce Bank.

Furthering the trend, the Postal Savings Bank of China and the China-headquartered Chang Guang Satellite Technology sent a jointly developed satellite into space this month, the Economic Observer reported.

Access to satellite-aided remote sensing – an outgrowth of China’s space technology since its commercialisation kicked off in 2014 – helps banks track assets such as property and vehicles for which they intend to lend money or have already made outstanding loans, analysts said.

High-resolution satellite pictures help gauge the status of loan collateral to ensure it remains viable for repossession in case of a loan default, they explained.

“The goal is to reduce non-performing loans and assess better the rural and small business market when traditional credit records may not be complete,” said Liang Yan, a professor of economics at Willamette University in the US.

“My understanding is that some banks use proprietary satellites and remote sensing to monitor borrower-collateral assets – such as agricultural land, construction progress on real estate projects and industrial activity – to assess and control credit risks of their loans,” Liang said.

The shift towards space-based surveillance comes as some of China’s largest banks continue to grapple with high levels of bad assets in their property-loan portfolios amid an ongoing real estate slump.

Non-performing loans in China stood at 1.5 per cent at the end of last year. While significantly lower than the record high of 12.4 per cent seen in 2005, the figure has crept up from a record low of 0.9 per cent in 2011, according to economic data provider CEIC Data.