15 billion USD eyeing China's NPL

A latest report of Pricewaterhouse affirms that foreign investors will spend 15 billion USD on the non-performing loans (NPL) of China's banking sector to accelerate its reform. Nearly all global prestigious investment banks and fund management companies, the report says, have shown strong interest in China's NPL.

Ted Osborn, Partner of PwC HK told the International Financial News that they received a lot of inquiries every day from US and Europe about buying bad assets of China¡¯s banking sector. He thinks it is very important for Chinese banks to dispose their bad loans before 2006 to improve their comprehensive competitiveness so that they are able to compete with foreign players.

For foreign capital, the massive bad assets involving various sectors represent extensive business possibilities. Much of the bad asset has resulted from inadequate investment. But the prospect of the projects is economically promising. This makes a hot potato for Chinese banks a clean potato for overseas investors who are endowed with rich financial resources.

China's four biggest state-owned commercial banks had disposed 14.5 billion USD bad loans by September 30, 2004 since 1999.

Now China's banking sector holds the second largest bad assets in the world, following Japan's. Ted said slow progress of China¡¯s banking sector on selling its bad loans may distract the attention of overseas investors who would tap other markets.

But experts also question the efficiency of foreign capital's participation into the disposal of the bad assets of China's financial sector although they basically agree to encourage such participation. Is a benchmark possible? What goal should be set for the recovery of the loans? If clear answers can be available to these questions, more objective conclusions can be made on results of overseas investors' stake on the disposal of the bad loans, experts believe.

By People's Daily Online