Research About Cause Of Non-performing Loans In Commercial Banks Of China

Non-performing loans has always been the bottleneck in the development of Chinese commercial Bank. We have to promote the management of non-performing loans in order to face the fierce competition and challenges from the foreign banks, yet the first step is to find out the causes of it.This paper uses a panel data set of public listed companies in China to empirically explore the cause of non-performing loans of commercial banks of China. According to the classical theories about non-performing loans, we come up with two causes. And we want to make sure if the two causes are still true in the 2000's. First, we use logistic model to divide the companies into four risk groups. Then we use two models to test empirically the causes of non-performing loans. This research strategy makes it possible to address two major questions: Do the Chinese banks still favor state-owned enterprises? Do these banks allocate their loans by the same risk management standard?According to the results, we come to the conclusions: The Chinese banks do not favor state-owned enterprises any more and these banks do allocate their loans by the same risk management standard. The conclusions mean that the problem of soft budget constraint has been improved.Finally, we give some suggestions of managing the non-performing loans in China from the aspect of the government and the commercial banks.