The Cleanup features regular and in-depth analysis of the ways China’s financial system is dealing with the risks that potentially threaten its stability.

Creditors’ Committees
Corporate Deleveraging
June 25, 2018

China’s financial system is a little like the Island of Misfit Toys.[1] From a distance everything looks familiar, but up close it becomes apparent that things aren’t built the way you might expect. Take the country’s money-market funds: they aren’t managed by institutional investors like Vanguard and Fidelity but by internet giants Alibaba and Tencent. Meanwhile, trusts don’t help preserve… READ MORE

Bad Banks
Financial Asset Exchanges
May 3, 2018

Financial asset exchanges are a distinctly Chinese type of financial institution. There are dozens of financial asset exchanges operating around the country as electronic auction houses and online fundraising platforms. They operate as a place where equity in state and private companies that are not listed on a stock exchange can be marketed and auctioned openly. They’re used by leasing… READ MORE

Asset-Backed Securities
April 9, 2018

When, in May 2016, Beijing first allowed banks to package nonperforming loans (NPLs) into asset-backed securities (ABS), it was greeted as an important new tool for helping banks clean-up their balance sheets. After almost two years, however, the issuance of NPL ABS remain relatively thin. In fact, the total value of bad loans packaged into ABS in the whole of 2017 was less than… READ MORE

Bad Loans
March 12, 2018

On the face of it, China’s banks look remarkably robust. By international standards, China’s nonperforming loan (NPL) ratio is still incredibly low. After gradually rising since 2012, the NPL ratio peaked at 1.76% outstanding loans at the end of September 2016, before leveling off at 1.74% where it has remained ever since. At 1.74%, it is roughly in line with… READ MORE

Bad Loans
Provincial NPL
Bad Banks
March 12, 2018

In 2014, the China Banking Regulatory Commission (CBRC) started approving the establishment of local asset management corporations (AMCs)—otherwise known as bad banks—to compete alongside the Big Four AMCs (Cinda, Huarong, China Orient, and Great Wall) that had been operating at the national level since 1999. Although the new provincial AMCs were granted the right to buy batches of nonperforming loans… READ MORE