More than 60 percent of Chinese bankers highlighted concentrated outbreaks of nonperforming loans as the top risk facing the banking sector, and 52 percent of the bankers said they would pay close attention to risks associated with local government debt, according to a latest survey.

The bankers revealed their top risk concerns as the quality of credit assets began to stabilize. Data released by the China Banking and Insurance Regulatory Commission on Monday showed that the balance of Chinese commercial banks' nonperforming loans declined by 6.8 billion yuan ($1.02 billion) quarter-on-quarter to 2.03 trillion yuan at the end of the fourth quarter of 2018, and the NPL ratio dropped by 4 basis points to 1.83 percent.

Nearly 64 percent of the bankers forecast that the NPL ratio is likely to increase, according to a survey jointly issued on Tuesday by the China Banking Association and PwC. The survey was conducted in 31 provincial-level administrative divisions last year, recovering 2,380 valid questionnaires from various banking institutions.

Regarding local government debt risk, 60 percent of the bankers said this is mainly a result of local governments' emphasis on project implementation and neglect of debt management in the short term, which is caused by the performance evaluation of government officials. About 52 percent of the bankers said it may be difficult for local governments to repay loans due to the long repayment period and low returns on investment for infrastructure projects.

Local government debt and corporate debt are two areas of regulatory focus during China's tough battle against financial risks, Wang Zhaoxing, vice-chairman of the CBIRC, said at a news conference on Monday.

"Leverage ratios of local government and corporate debt have lowered in the past two years and remain basically stable at present. The deleveraging efforts will continue as China deepens supply-side structural reforms," he said.

Zhou Liang, also vice-chairman of the CBIRC, said the regulator will analyze local government debt case by case and take targeted measures in "dismantling bombs". He emphasized that the regulator will prevent and control financial risks under the premise that China maintains steady and sustainable economic growth.

The People's Bank of China, the central bank, will deal with risks in key areas in a steady and orderly manner and will proceed with structural deleveraging, Pan Gongsheng, deputy governor of the central bank and administrator of the State Administration of Foreign Exchange, said during an interview with China Central Television on Tuesday.

Apart from stepping up banks' efforts to dispose of NPLs, the central bank will provide for the orderly disposal of bond default risks and contain the growth of hidden local government debt while defusing existing government debt, Pan added.

Among all credit risks, more than 60 percent of the bankers surveyed regarded the risk associated with loans to industries identified with excess capacity as the top credit risk facing the banking sector, followed by small and microsized enterprise loans (46.3 percent) and real estate development loans (36.8 percent).