A Study On The Current Situation And Disposal Of Non-performing Loans Of Commercial Banks In China

Since 2010,the economic growth rate of China has gradually declined.The problem of overcapacity has been revealed and the non-performing loan of banks is becoming the focus of concern once again.However,the official NPL ratio does not take the policy stripping into account so that the official data cannot reflect the real situation of China’s commercial banks.In this paper,we use the panel data of A-share listed companies for the first time.Using indicators like net profit and interest coverage ratio,we identify the companies that have the NPL problem.Then,we calculate the NPL ratio of commercial banks.The results show that there are two stages when the NPL ratio of commercial banks of China increased rapidly.The first stage is from 1998 to 2003,the second stage is from 2010 to 2015.Although we underestimate the actual NPL ratio using listed companies’ data,the results we calculate are not only much higher than the official announcement,but also higher than the level during 1998-2003.The high NPL are mainly concentrated in the overcapacity industries,such as non-ferrous metals,building materials,mining and steels.The companies with the NPL problem are located mainly in central and western regions of China.In addition,this paper also finds that the NPL ratio of state-owned enterprises is much higher than that of private enterprises.This not only reflects banks’ credit preference for state-owned enterprises,but also shows that the operating situation of state-owned enterprises is worse than that of private enterprises.After measuring the NPL ratio,this paper also summarizes the domestic and foreign experience of the disposal of non-performing loans and then provides the solutions about how to deal with the high NPL ratio.There are three methods to reduce the NPL.The first is to establish the asset management companies for commercial banks.The second is to start a new round of "Debt to Equity".The third is restart NPL securitization.There are other three tips to control the incremental of NPL.Firstly,commercial banks have to strengthen their credit management capacity.Secondly,the commercial banks should closely focus on the requirements of the national industrial structure adjustment so that the allocation direction of resources is consisted with the direction of economic transformation.Thirdly,the commercial banks should strengthen the internal ability of credit risk management.