The key to prevent systemic financial risks is to strengthen the disposal of toxic assets. According to the preliminary statistics of the CBRC, from January to September this year, 9799 billion yuan of bad loans were disposed of by the banking industry, with a larger increase in the year on year. Guo Shuqing, chairman of the China Banking Regulatory Commission, said that at present, the loan classification management level of various institutions is different. Therefore, bad loans need to be fully exposed. According to the characteristics of China's toxic assets and disposal methods under the new norm, the reporter interviewed Tian Lihui,the head of Nankai University Institution of Financial Development.
Reporter: through the semi annual report of the five state-owned banks in 2017, we can find that asset quality has been improved in a comprehensive way. The indicators of bad loans, concerned loans and overdue loans as leading indicators have improved significantly. Does this mean that the inflection point of bad loans has been established?
Tian Lihui: Yes. In my opinion, the turning point of bad loans in China has emerged. At present, although the total amount of non-performing asset market in China is still likely to increase temporarily, the growth rate has already narrowed.
The source of bad loans is the debtor's poor benefit , or the bad governance of creditor's company. Recently, in the effort of the financial regulators and strong supervision, corporate governance of Chinese commercial banks has been significantly improved, risk control has been significantly enhanced, and illegal loan and arbitrage loan has been curbed.
More importantly, the economy of China has a steady trend, and the profit situation of the enterprise has been improved. The data released by National Bureau of statistics at end of September shows that, from January to August this year, the national scale industrial enterprises make a total profit of 49213.5 billion yuan, an increase of 21.6%. Although some macroeconomic indicators dropped in August, corporate profits continued to improve. In August, the profits of Industrial Enterprises above designated size increased by 24% over the same period last year, which is the largest increase since 2013. This means that the transformation of industrial upgrading and the transformation of the economic environment have begun to be effective.
Reporter: At the beginning of this year, the government work report said that the prevention of financial risks in 2017 will focus on four areas, the toxic assets is the first one. What are the new features of this new bad assets compared with the peak of the bad assets at the end of the last century and the beginning of this century?
Tian Lihui: Before the formation of new economic growth momentum and the promulgation of regulations this year, because the financial resources mismatch, credit deterioration of the environment and risk assets increase, there appeared a new round of bad assets in our country. Compared with the past, this round of bad assets involves a large range, high difficulty in disposal, and a longer operation cycle.
This round of toxic assets exists not only in commercial bank loans, but also in the development of non banking institutions. As of the first quarter of 2017, concerned loans of commercial banks were 3.4 trillion yuan, and the balance of non-performing loans was 1.58 trillion yuan. By the end of 2016, the number of risk projects in trust industry was 545, and the scale of risk projects reached 1175.4 billion yuan.
In fact, most of the bad assets of this round of enterprises have collateral, for example, real estate assets such as factory buildings and hotels. Compared with the past, the recovery rate should be relatively high. However, besides the bad loans of enterprises, the risks of Internet financial and quasi-financial institutions are outstanding. These risks are easy to have cross infection with financial institutions and risk transmission. If the economy continues downward, the banking financial institutions and bad loans overdue may not decline, then it is easy to form a systemic financial risk.
Reporter: In the context of the new normal economy, what changes have taken place in the means of disposing of toxic assets in China? What challenges do we face?
Tian Lihui: Facing the new complex situation, China's toxic assets disposal presents three major trends:
Firstly, it is more marketable. Secondly, it is more pluralistic . Thirdly is more innovative.
At present, the main challenges of the disposal of toxic assets in China are lack of liquidity, judicial support, asset recovery and professional talents……
Reporter: What role can the Internet play in the disposal of bad assets?
Tian Lihui: the Internet has some features: universality, fairness, real-time interaction, and it can spread information and knowledge without cost or low cost despite of time and space. These contribute to the development of the disposal of non-performing assets market, andcan effectively improve the transparency of information, aggregate social idle funds, rise non-performing assets disposal efficiency.
With the help of the Internet platform, the auction model of the disposal of non-performing assets , the mode of the collection platform and the mode of data service have also emerged in our country.
Reporter: Do you have any suggestions for dispose of toxic assets?
Tian Lihui: At present, the basic to dispose non-performing assets in our country is to prudent control and enhance the implementation of the risk creditor debtor's solvency, the specific measures include: to use mergers and acquisitions, stage management, debt-for-equity swaps, Securitization of non-performing assets, integration of the Internet financial platform for the disposal of non-performing assets
On the one hand, China's commercial banks and other creditors need to enhance corporate governance capabilities, implement risk prevention and control, and prevent lending to bad companies or low-energy companies from the source.
On the other hand, China needs to continue to deepen the economic reform, improve the business environment, and constantly improve the efficiency, profitability and core competitiveness of our enterprises. Enterprises should also comply with the tide of the times, actively reform and adjust, and serve the national economy and the people's livelihood. The solvency of the enterprise is determined by the macro environment and its own micro practice, and it is dynamic. The the 19th National Congress of the Communist Party of China open the new political cycle,it has also accelerated the new cycle of the economy, further improving the solvency of Chinese enterprises.
To reduce and prevent the bad assets of the emergence and development from the source, the disposal of non-performing assets in our country's should be made to use the following means: First is to actively promote the merger and restructuring of debt chain, non-performing assets formation optimization of complex situation, to maximize the integration of inventory of non-performing assets. Second is that the creditor should actively take over or participate in the operation stage of toxic asset to confirm the assets periodically,, try to improve asset consolidation and operation. Third is in the stage of economic recovery, we should vigorously promote the implementation of debt to equity swap, the integration of industrial-finance capital, so that the finance can service the real economy and the specific enterprise. Fourth is the Asset Management Company should actively seek the non-performing asset securitization pilot, improve credit and broaden the capital market depth. Fifth is the construction of a unified justice internet platform that dispose non-performing assets which can improve the information flow and expand the breadth of the market to achieve openness and fairness.
