China's asset management corporations

Guonan Ma and Ben Fung

No 115, BIS Working Papers from Bank for International Settlements

Abstract: To address the banking system's non-performing loan (NPL) problem, the Chinese government set up four asset management corporations (AMCs). They were to buy up bad debts of the big four state-owned commercial banks and dispose of them over 10 years, taking a large step towards NPL resolution. But in their first two years, these AMCs have made only a limited contribution to resolution of the NPL problem. They have taken over less than half of the NPLs at the big four banks. In addition, while AMC financing have been less than transparent, it appears to have burdened The People's Bank of China (PBoC) with greater risks to date than the Ministry of Finance (MoF), although there have not been to date any evident monetary consequences. Under plausible recovery scenarios, the AMC losses would surpass the current financial contributions to the AMCs from both the MoF and the PBoC. Since their cash recoveries have lagged their interest obligations, the AMCs face rising cash flow pressure. In response, the government is pushing for speedier asset recovery, as evident in the milestone of the first international NPL auction.

Keywords: banking; non-performing loans; asset management companies; China (search for similar items in EconPapers)
JEL-codes: G21 O53 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2002-08
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

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