Chapter 8: Non-performing debts in SOEs and the effect of policies aimed at their solution
Gangming Yuan Since 1990, in the process of ﬁnancial marketization and due to macroeconomic ﬂuctuation, non-performing loans (NPLs) have become a serious problem for Chinese banks. State-owned enterprises (SOEs) utilize over 80 per cent of bank loans (PBC 1997).1 The large amount of non-performing debt (NPD) cumulated in SOEs increases the ﬁnancial risk of banks and causes macroeconomic ﬂuctuations. Based on data collected in a sample survey,2 this chapter will evaluate the current situation of NPD in SOEs, trace its causes and analyse the effect of policies aimed at resolving the problem. ESTIMATION OF NPD IN SOEs The NPD of SOEs has been discussed extensively in recent years. However, the exact situation of NPD in SOEs remains unclear. The state-owned commercial banks have given most of their loans to SOEs, so NPLs in SOEs should approximate those of banks. The data on the ratio of NPLs to total loans in state-owned banks, estimated informally by research institutes of the banks, usually range from 20 to 29 per cent (Xie Ping 1999; Liu Haihong 1999). The ofﬁcial ﬁgure for the ratio of NPLs in state-owned banks3 is 7.9 per cent, in which the ratio of slack loan and dead loans to all loans is 5 per cent and 2.9 per cent, respectively (Dai Xianlong 1998a, 1998b, 1999). ‘Alteration of Loan Period’ There is a problem with identifying the true NPL in all overdue loans in Chinese banks. Any loan exceeding the term of redemption is regarded in general...
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