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State-owned Commercial Banks Asked to Cut Bad Debts
China's top financial official said Thursday in Beijing that the country's four big state-owned commercial banks are required to cut their non-performing loans (NPL) at an annual average decreasing rate of 2 to 3 percentage points in the next five years.
Dai Xianglong, governor of the People's Bank of China (PBC), the country's central bank, made this remark at the two-day 2001 Non-performing Loans International Forum, which opened Thursday.
The state-owned commercial banks are suffering high rate of bad debts and this will put the country's financial sector in danger, said Dai.
Non-performing loans totaled 1.8 trillion yuan (about 220 billion U.S. dollars ), equal to 26.62 percent of the four state-owned commercial banks' total loans, as of September this year. And about 476 billion yuan in loans has been lost.
China plans to sort the quality of loans into five grades, which is a globally accepted way to clarify the quality of loans, in the next year, Dai added.
And more effort will be made to transform the state-owned banks into state-controlled joint-stock banks so that the banks will improve efficiency and update their management framework, he noted.
Meanwhile, the country's efforts to cut bad debts have taken effect. The NPL rate has dropped by 2.6 percentage points from the beginning of this year and it is expected to decrease by a large margin over the next couple of years, according to the PBC.
The Chinese government set up four assets management companies in 1999 to handle the non-performing assets bought from the four big state-owned banks and the State Development Bank.
They have bought 1393.9 billion yuan in non-performing assets from those banks so far, of which about 93 billion yuan has been disposed of and 37.7 billion yuan has been recovered.
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