| The non-performing loans (NPLs) in commercial banks will directly endanger financial safety and social stability. Great attention has been given by governments all over the world. It also seriously existed in commercial banks in china. Up to the end of 2003, the total amount of NPLs in the commercial banks and rural credit corporations had reached to RMB4,000 billion (including the amount stripped off to the assets management corporations). How to effectively dispose NPLs has become a topic to be urgently studied and explored in global financial field. Successful experiences have been gained in some aspects of disposition of NPLs in China and overseas. But common problems have also been met with, i.e., how to use evaluating technique to get internal value and sale price of NPLs; how to convert market value of NPLs to non-market value. It is most important for creditor to dispose NPLs and preserve the assets to the greatest possible extent. For this purpose, the paper will, on the basis of exploring the general theory of NPLs, focus on studying the evaluation theory and methods of internal value and on factors that influence the value-cashing and on test of the efficiency and effectiveness of the conversion from market value to non-market value to fill the gap in evaluating sector both at home and abroad.Clarifying understanding of basic theory on three aspectsFirst, re-understanding the value of NPLs.To the banks, NPLs are considered as assets that will suffer loss. But to the investors they are of great investment value. Therefore, the government and the financial institutions cannot simply write them off or dispose them in other simple ways. We should tap with efforts the potential value of NPLs and choose disposition models and methods to effectively dissolve financial risks while in the meantime, to maximize NPLs recovery value.Second, re-positioning evaluation of NPLs.Some disposition institutions have gone to an extreme by regarding the evaluating conclusion as the only basis for the disposition of assets from not paying attention to the evaluation, which has led and is now leading to improper ways of evaluating only for the purpose of evaluation and pricing before evaluation. The mistakes are pointed out definitely in this article and the recognition of evaluation of NPLs is suitably positioned. The article shows that evaluation is a technical process of discovering value of NPLs while disposition is a market action of value-cashing of NPLs.Evaluation is the fundamental basis of pricing on NPLs disposition, but not the only one basis.Third, re-defining the value type of NPLs.In the past, the evaluation value was the only one value for the assets and the disposition price would move round this value. This paper shows that the evaluation value of NPLs should not be limited to only one type. The main value types often used in the evaluation of NPLs are market value, in-use value, liquidation value, investment value, going concern value and salvage value. The evaluating agencies should clarify and define the value type according to the specific conditions such as purpose and object of the evaluation. This opinion has been fully absorbed in "The Guidance on Evaluation of NPLs(draft)" just finished by China Assets Evaluating Association.Explore and practice five evaluating methods suitable for different NPL types and different disposition meansEvaluation methods are technical means to realize the evaluation and estimation of the assets. Current essays and books on evaluation published in China only elaborate on three methods (market approach, earnings approach, cost approach) and their application. Due to the special character of NPLs, the above-mentioned approaches cannot be used directly. The evaluating methods from abroad (such as CAPM) are also not suitable for evaluating NPLs. By absorbing idea of basic evaluating methods and fully considering the characteristic of NPLs, the paper systematically summarizes and puts forward five methods (Credit Evaluation Appro...
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