Impede The Disposal Of Non-performing Assets Of China's Banking Barriers And Improve The Disposal Measures

Banks' non-performing loan (NPL) is a problem afflicting almost every country of the world ubiquitously. It has constituted the major risk that threats the safety of the banking sector and even the financial system of one country. The accumulation of NPL in one economy will induce banking crisis, which has occurred in many countries, such as America, Japan, east European transition economies, Southeast Asia and Korea. These countries have explored different ways to address the NPL problem. China is not an exception. China's NPL has a large scale, accounting to 25-30% of the total assets of the banking sector. It has been considered as a big risk hibernating in China's financial system.In 1999, China has set up four asset management companies (AMCs) to manage the NPLs with amount of 1400 billion RMB transferred from four state-owned commercial banks. However, these AMCs' performance to dispose of these NPL falls short of expectations. Then- way of NPL resolution is limited and inefficient With analysis of the source and features of China's NPL and other countries' experience of NPL resolution, some suggestions are proposed in this paper to address China's NPL problem from the standing point of China's AMCs.Chapter one theoretically defines NPL and the usual measure to resolve it. In different loan classification system, NPL has different definition. Practically, America, Japan, Southeast Asia countries have their own style of NPL solution. One common model is good-bank and bad bank separation.Chapter two is the source and current situation of China's NPL. The source of China's NPL is complicated, both in the macro and micro level. In macro level, China's credit system inheriting from the planning economy, economic policy and macro economic environment are the main reasons. In micro level, the borrowers' weak financial strength due to mismanagement or excessive debt makes the loan non-performing. The governments interferewith the banks' lending decision, resulting in the flow of loans to inefficient use. The scale of China's NPL is enormous.Chapter three analyses the progress and impediment of China's NPL resolution. With time going, the NPL problem will become tougher, and the quality of NPL will deteriorate. The progress is not satisfactory. There are both internal and external factors that hinder these AMCs to operate effectively.The suggestions of promoting the progress and effect of China's NPL resolution are proposed in Chapter four. It is necessary and urgent to establish a NPL resale market in China. The huge amount of NPL in China needs a big market with enough market to accommodate it. However, the current scale of China's capital market is relatively small. So some institutional investors, such as fund, insurance companies, investment banks and even foreign investors should be encouraged to enter this NPL market. In addition, the four AMCs monopoly in the primary NPL market. These institutional investors should be encouraged to enter both the primary market and secondary market Their participation will overcome AMCs' shortcomings and boost competition. Foreign prestigious investment banks, such as Goldman Sachs, Morgan Stanley, have rich expertise and experience in NPL resolution. They could serve as the financial consultants of AMCs or purchase the NPL by themselves.