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China's asset management corporations

Author

Listed:
  • Guonan Ma
  • Ben S.C. Fung

    (Bank of Canada)

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.

Suggested Citation

  • Guonan Ma & Ben S.C. Fung, 2002. "China's asset management corporations," BIS Working Papers 115, Bank for International Settlements.
  • Handle: RePEc:bis:biswps:115
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    References listed on IDEAS

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    1. Leslie E Teo & Charles Enoch & Carl-Johan Lindgren & Tomás J. T. Baliño & Anne Marie Gulde & Marc G Quintyn, 2000. "Financial Sector Crisis and Restructuring; Lessons from Asia: Lessons from Asia," IMF Occasional Papers 188, International Monetary Fund.
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    Citations

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    Cited by:

    1. Gary Gorton & Lixin Huang, 2004. "Liquidity, Efficiency, and Bank Bailouts," American Economic Review, American Economic Association, vol. 94(3), pages 455-483, June.
    2. Alicia García-Herrero & Sergio Gavilá & Daniel Santabárbara, 2006. "China's Banking Reform: An Assessment of its Evolution and Possible Impact," CESifo Economic Studies, CESifo, vol. 52(2), pages 304-363, June.
    3. Vincent Bouvatier, 2010. "Hot money inflows and monetary stability in China: how the People's Bank of China took up the challenge," Applied Economics, Taylor & Francis Journals, vol. 42(12), pages 1533-1548.
    4. John Hawkins, 2003. "Central bank balance sheets and fiscal operations," BIS Papers chapters,in: Bank for International Settlements (ed.), Fiscal issues and central banking in emerging economies, volume 20, pages 71-83 Bank for International Settlements.
    5. Piet van Gennip, 2005. "Loan Extension in China: a Rational Affair," DNB Working Papers 037, Netherlands Central Bank, Research Department.
    6. Vincent Bouvatier, 2006. "Hot Money Inflows in China : How the People's Bank of China Took up the Challenge," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00111153, HAL.
    7. Eric Girardin & Sandrine Lunven & Guonan Ma, 2017. "China's evolving monetary policy rule: from inflation-accommodating to anti-inflation policy," BIS Working Papers 641, Bank for International Settlements.
    8. Robert N McCauley, 2006. "Consolidating the public debt markets of Asia," BIS Papers chapters,in: Bank for International Settlements (ed.), Asian bond markets: issues and prospects, volume 30, pages 82-98 Bank for International Settlements.
    9. Daniel Poon, 2014. "China’s Development Trajectory: A Strategic Opening for Industrial Policy in the South," UNCTAD Discussion Papers 218, United Nations Conference on Trade and Development.
    10. Barbara Stallings, 2004. "Financial Liberalization, Crisis, and Rescue: Lessons for China from Latin America and East Asia?," IDB Publications (Working Papers) 48078, Inter-American Development Bank.
    11. Gordon, M. J., 2003. "Is China's financial system threatened by its policy loans debt?," Journal of Asian Economics, Elsevier, vol. 14(2), pages 181-188, April.
    12. Chen, Ting-Hsuan & Chou, Hsiu-Hsia & Chang, Yuan & Fang, Hao, 2015. "The effect of excess lending on bank liquidity : Evidence from China," International Review of Economics & Finance, Elsevier, vol. 36(C), pages 54-68.
    13. Lejot , Paul & Arner, Douglas & Schou-Zibell, Lotte, 2008. "Securitization in East Asia," Working Papers on Regional Economic Integration 12, Asian Development Bank.

    More about this item

    Keywords

    banking; non-performing loans; asset management companies; China;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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