The asset quality of China's large State-owned commercial banks continued to improve during the first six months of this year, and proved to be a crucial factor in their profit growth during the same period.

As of June 30, the non-performing loan balance of Agricultural Bank of China Ltd declined by 8.1 billion yuan ($1.2 billion) from the beginning of this year to 185.9 billion yuan. Its NPL ratio dropped by 19 basis points to 1.62 percent.

The NPL ratio of Industrial and Commercial Bank of China Ltd, China Construction Bank Corp, and Bank of China Ltd also fell by 1 basis point, 1 basis point and 2 basis points respectively.

"The asset quality of large State-owned commercial banks has bottomed out, reflecting the deepening of adjustments in the real economy. The adjustments include the banks' efforts to readjust the structure of credit and tackle bad loans," said Zeng Gang, director of banking research at the Chinese Academy of Social Sciences' Institute of Finance and Banking.

"Asset quality improvement became a major source of contribution to banks' profit growth, as the demand for new provisions to loan losses reduced, resulting in a reduction of costs," Zeng said.

Agricultural Bank of China posted a 6.7 percent net profit growth year-on-year in the first half, hitting a record high in the past three years. ICBC, CCB and BOC also recorded profit growth of 4.5 percent, 6.08 percent, and 5.21 percent respectively.

"China has made positive progress in economic restructuring, transition of growth drivers, and the battle against major financial risks," said Zhao Huan, president of Agricultural Bank of China, at a news conference on Tuesday.

In spite of his strong confidence in the Chinese economy, Zhao said Agricultural Bank of China has been constantly observing the impact of US-China trade conflicts on the global economy and has prepared in advance for possible risks.

Huang Zhiling, chief economist of CCB, agreed with Zhao and said: "The world economic environment is highly uncertain in the second half of this year ... Banks will face greater challenges in risk management as financial market fluctuations intensify. Our executive management team has realized these changes and taken measures accordingly."

Amid new challenges due to changes in the external economic environment, various circles of the Chinese society are expecting an increase in the bank loan supply, said Wang Zuji, president of CCB.

"State-owned commercial banks will step up credit support for major infrastructure projects and the restructuring of the Chinese economy through innovation of products and service models," Wang said.

During the first six months, new onshore renminbi loans of BOC reached 414.5 billion yuan, mainly directed to key areas of national economy. The bank's lending will keep growing steadily in the second half and support the development of strategic emerging industries including high-end manufacturing, information technology and environmental protection, said Liu Liange, president of BOC.

"We'll use our global network to attract foreign investments in China ... and will strive to develop trade finance. We plan to offer international trade settlement of $650 billion to foreign trade enterprises in the second half, plus trade finance and guarantees worth $100 billion," Liu said.