On The Establishment And Operation Of China's Assets Management Corporations(AMC)

In order to handle bad loans of the four state-owned commercial banks, four AMCs (Assets Management Corporation),namely XINDA,HUARONG,DONGFANG and CHANGCHENG,were established in succession since April, 1999 in our country. Oppinions towards that if these four AMCs can successfully settle the bad loan problem are different. This article stresses on analizing the necessity and rationality of setting up AMCs to handle non-performing loans by using professional methods. At the same time,this article also tries to find out the restrictive factors and hazards which AMCs will be confronted with and finaly tries to design an effective way of operation for these four AMCs.The ratio of bad loans in China is very high, getting to 30%.The amout of bad loans peeled off from four state banks gets to 13939 billion yuan. Such huge amount of bad loans has already become a very big potential risk to China's financial system. What to be especially pointed out is that in China, due to the undeveloped capital market, state-owned enterprises manufacturing funds mainly come from bank loans, so the problem of bad loans is also the problem of super liabilties of state-owned enterprises. Super liabilties can not help these enterprises take a turn for the better, on the contrary, it makes them get into deficit and large debt. The problem of bad loans ought to be handle without delay, otherwise it will not only become an obstacle to state banks' progress of comercial reform, but also be of vital importance to the existence and development of more than half of the national state-owned enterprises. It can even bring tremendous strike to the society's stabilization because a large number of personnel will loose their job if the enterprises go bankrupt due to being short of manufactureing funds. All of these factors go against the long term steady growth of China's national economic.That is to say the problem of bad loans has got to be settled as soon as possible.To set up AMCs to handle bad loans by using professional methods is a better and more effective way relative to other ways of solutions. That the biggest advantage of AMCs is that they are provided with special legal status and all kinds of measures of investment banks.Hence as professional institutions in the field of managingbanks' bad loans,they can help get advantages in reducing handling costs .lowering management losses and raising handling efficiency and chances of success.One thing which should be emphatically pointed out is that AMCs can act as catalyzer in the course of system reform of state-owned comercial banks and enterprises.Banks and enterprises are forced to form modern enterprise system during the course of bad loans being managed.lt will control the increment of bad loans as well as save the accumulation.lt is really a good way which can kill two birds with one stone.To set up AMCs to solve the problem of non-performing loans is worldwide popular.AMCs in many countries such as RTC in U.S.A, AMC in Sweden and Danaharta in Malaysia achieved remarkable success.This article also draws some conclusion which can give us some reference in running our country's AMCs after making a compare to these three countries AMCs1 experiences.China now is experiencing a change from traditional planned economy to social market economy.Compare to AMCs in developed market economy countries, AMCs in China would meet with more restrictive factors in the future.The most extrusive ones are the following: property rights of state-owned enterprises are not specified;people usually think that the sense of credit is indifferent;capital market is underdeveloped;intermediary agencies lack of experiences; AMCs action of managing bad loans lack of legal support;AMCs are short of skills and persons with professional abilities; the amount of bad assets is very large and types are special.lt is necessary to do some work which can help AMCs to run successfully, such as to strive for policy support and cooperation of all circles,to build up a more effectieve capital market and property rights...