Non-performing loans surged in the city of Wenzhou, Zhejiang province, after it was named a pilot zone in March to test a series of financial reforms.

As of the end of June, the balance of bad loans reached 18.1 billion yuan ($2.8 billion), almost double the 9.4 billion yuan at the start of the year. The corresponding bad-loan ratio jumped to 2.69 percent, up from 1.33 percent at year-start.

In June, 2011, before the credit default storm hit the city of private capital, the bad-loan ratio was 0.37 percent, one of the nation's lowest. Since then, the rate has been increasing over the past 12 month, even after the reform in March aimed at ending reliance on shadow banking and allowing private capital easier access to the financial industry.

The rise of bad loans comes also as growth slowed in the city. Up to 615 large-scale industrial enterprises posted a loss, up 49.3 percent year-on-year. They lost a total of more than 1 billion yuan.

gaochangxin@chinadaily.com.cn