Study On The Pricing Problem In China's Non-performing Loans Market

Non-performing loans (NPLs) is a very significant problem in China's economy and finance reform. After the financial crisis of Southeast Asia caused primarily by the accumulation of NPLs, the huge amount of NPLs in China's financial sector has attracted much attention from both the academe and the financial industry inside and outside the country, although China was not affected by the crisis.NPLs have become a big threat to China's economy. And according to her commitment to WTO, China will completely open her financial market at the end of this year. Then Chinese commercial banks will confronted with even more fierce competition in international financial market. If we cannot deal with NPLs problem successfully, the commercial banks are not able to survive in the competition. In order to dispose of the NPLs, in the year 1999, China's four Asset Management Companies (AMC) was established and they acquired totaling RMB1,394 billion from the four State-Owned Commercial Banks (SOCBs). Afterwards more NPLs were removed from the four banks' balance sheets. These AMCs are expected to dispose of their NPLs within ten years since their establishment. By now their combined NPL portfolio is approximately RMB1,800 billion. The reason why the disposition hasn't completed yet is that the pricing of NPLs hasn't been solved properly either in theory or in practice. Pricing is also a difficult problem in the study of NPLs.So this paper talks about this issue and makes some attempts to do some work in NPL study. The main content and innovation of this paper is as follows,Firstly, the three dimensions of NPLs pricing of market disposition have been established.This paper summarizes the principal participants and the transaction coursed of the market disposition of NPLs. It is pointed that the market pricing of NPLs is not the decision of a certain price, but a complicated system. In this paper, three dimensions of NPLs pricing of market disposition have been established as the research framework, they are transaction participants, transaction process and the number of NPLs.