International Law

That?s Great, But What Aren?t You Telling Me?

By Stan

From Shanghai Daily:

Banks on China’s mainland had reduced their exposures to bad loans in the third quarter of this year as they boosted risk controls amid the global financial turmoil, the industry regulator said today.

The average non-performing loan ratio at banks on the mainland was 5.49 percent by the end of September, compared with 5.58 percent as of June 30, according to the China Banking Regulatory Commission.

Sounds nice, but this isn’t really the issue, is it? All of those huge commercial properties that are sitting there half vacant are not tied to "bad loans" — not yet.

The big danger is how many new bad loans there will be as the economy slows down.

At the risk of being unreasonably gloomy, shall I remind everyone that the last time we dealt with a big NPL problem in China (around 2001, remember the -ITICs?), there was a lot of shuffling assets around, securitizing debts, etc. And yet, after all of that, what percentage of NPLs were disposed of efficiently, and was a long-term solution to dealing with that debt ever really found?

Not really. That’s what bothers me. There is a strong tendency to kick the debt can down the road when it comes to this sort of thing, which just makes everything worse.

Have a nice day.

Full post as published by China Hearsay on October 30, 2008 (boomark / email).